Hidden Nook

Powerful groups, including the AFL-CIO and AARP, have bashed the idea of privatization, saying it would shred the retirement safety net and leave more Americans at the mercy of market swings. The AFL-CIO in December sent letters to 46 major financial companies, asking them to renounce the concept of private Social Security accounts.

Facing that kind of reaction, "Most people in the (investment) business are keeping a very low profile," said Greg Valliere, chief strategist at Stanford Washington Research Group, a political-consulting firm. "They don't want to be identified as proponents, because of the potential backlash." Among Wall Street's largest firms - Merrill Lynch, Morgan Stanley, Citigroup Inc. and Prudential Financial Inc. - all declined to comment about the Social Security debate.

Individual contributions to these private accounts would be limited to $1,000 a year under a recommendation from a Bush-appointed commission in 2001. A key financial-industry concern is that, at least initially, the accounts may be too small to be profitable for most companies to manage, given the paperwork and investor hand-holding that could be required. "None of my members is salivating at the prospect of managing millions of small accounts," said Marc Lackritz, president of the New York-based Securities Industry Association, the brokerage business' chief trade group.

"Once everybody has these accounts, the incentive for Congress to regulate them would be very strong," said Derrick A. Max, executive director of Alliance for Worker Retirement Security, a Washington-based coalition set up by the National Association of Manufacturers to lobby for private accounts.