The November 21, 2003 edition of The Washington Post carried an odd, and ironic, juxtaposition of two stories --- both of which relate to the future of retirement security in the United States.

The first story reported on the most recent startling story in the series of scandals in the U.S. mutual fund industry. That story reported on federal and state charges which had been filed the day before against Messrs. Gary Pilgrim and Harold Baxter for setting up a hedge fund that then made millions of dollars by making unfair and allegedly unlawful trades in mutual funds. What mutual funds did they rip off? The Pilgrim Baxter Mutual Funds! Yes, Messrs. Pilgrim and Baxter are the founders and chief executives of a family of mutual funds known as the Pilgrim Baxter Funds. The Pilgrim Baxter Funds managed the 401(k) and IRA retirement accounts of thousands of small investors. What those investors didn’t know was that Messrs Pilgrim and Baxter were charging regular monthly fees for managing those retirement accounts --- while also systematically looting those accounts for their own profit.

The Pilgrim Baxter Mutual Funds were some of the highest-flying funds during the go-go years of the late 1990s, but performed poorly in the early 2000s. It is now alleged that they were not only losing money for their investors, they were also stealing from them. You really couldn’t make up a worse story if you tried.

And this story was only the most recent bombshell in the burgeoning mutual fund scandal, first uncovered by New York Attorney General Elliot Spitzer in September of this year. Several of the very largest mutual fund companies on Wall Street have been implicated in conduct similar to that of Messrs Pilgrim and Baxter. And it is believed that there is still much more to be uncovered.

Now for the second story in The Washington Post on November 21. That story disclosed that the Bush Administration is renewing its push to privatize the Social Security system, as part of its 2004 presidential campaign strategy. As part of that campaign strategy, on November 18, 2003 Republican Senator Lindsey Graham of South Carolina introduced a bill to permit individuals to divert two-thirds of their social Security tax into private accounts.

Guess who those private accounts will be managed by --- Wall Street mutual funds! Hello, is anyone home here? In light of the current mutual fund scandals, you have to ask yourself how anyone in their right mind would trust Wall Street with five cents of their retirement security, let alone, what will amount to trillions of dollars from the Social Security Trust Fund.

So what can explain such a continuing push to privatize Social Security in spite of the overwhelming evidence of the terrible risks of investing through Wall Street? Why not fix Social Security through the ways that have been shown to work without taking such risks? The simplest answer is, as always, money.

Studies have shown that if only one-third of individual Social Security taxes are invested in private accounts, it will move $2.3 trillion in 10 years from the Social Security Trust Fund to private accounts managed by Wall Street investment firms. The typical fees charged by those firms to manage such accounts is at least 1%. 1% of $2.3 trillion is $23 billion. That is a $23 billion incentive for Wall Street to convince the American public to privatize Social Security. And that $23 billion for Wall Street is only half of what Senator Graham’s bill would deliver.