(Bloomberg News circulated the following article by Heidi Przybyla on March 15.)
NEW YORK — The AFL-CIO, the largest U.S. labor union, plans public protests against Charles Schwab Corp. and Wachovia Corp. because the companies back President George W. Bush’s plan for private Social Security accounts, a union official said.
The union on March 31 will hold at least 50 events in dozens of cities, including rallies outside Schwab and Wachovia headquarters, as it intensifies a campaign against financial companies supporting Bush’s plan, said Bill Patterson, AFL-CIO director of investment in Washington.
The AFL-CIO is attempting to choke off funding to the Alliance for Worker Retirement Security, the main business group backing private accounts. Earlier this month, Edward Jones & Co. and Waddell & Reed Financial Inc. pulled out of the group, which no longer lists members on its Web site.
“The campaign to sell this by the White House has not been firing all cylinders,” said Ethan Siegal, president of the Washington Exchange, a Bethesda, Maryland-based group that tracks federal policy for institutional investors. “It gave the unions an opening to pressure and use their political muscle.”
`No Position’
The main target of the union is San Francisco-based Schwab, “the poster child of the push by Wall Street firms to promote privatization,” said Suzanne Ffolkes, an AFL-CIO spokeswoman. The union expects at least 1,500 demonstrators outside Schwab headquarters and dozens more outside Wachovia offices including at the company’s headquarters in Charlotte, she said.
The union’s efforts are misguided, said Glen Mathison, a Schwab spokesman in San Francisco. “The membership was solely an effort to stay plugged into and current on the debate on this issue,” he said. “It does not and has never signaled our support for any particular proposal for Social Security,” he said. “We have not taken a position.”
Wachovia spokeswoman Carrie Ruddy declined to comment.
The American Federation of State, County and Municipal Employees and the Laborers International Union have written executives including Schwab Chairman Charles Schwab and Morgan Stanley Chairman Philip Purcell, warning that support for private accounts may cost them pension account business. U.S. unions have $400 billion invested in pension plans.
Slumping Support
The Financial Services Forum, an organization of chief executives of large financial services companies, is withdrawing from Compass, another business coalition that supports the president’s Social Security proposals, the Washington Post reported today.
Compass is an umbrella group of Washington-based organizations including the National Association of Manufacturers and the Business Roundtable that plans to spend as much as $20 million on advertising to promote Bush’s plan.
A Washington Post-ABC News poll published yesterday showed support for Bush’s handling of Social Security has declined to a four-year low of 35 percent, even as he has campaigned for it in 15 states over the last six weeks.
The union’s planned events in Chicago, New York, Philadelphia and other cities “will be bigger than anything we’ve done so far,” the AFL-CIO’s Patterson said.
`Beyond the Pale’
The union believes Schwab and Wachovia are the last remaining financial service companies in AWRS, he said. The two have “come down solidly on one side of the debate so far and that side has been for privatization,” including “bankrolling” AWRS, he said.
Derrick Max, AWRS director in Washington, said the union’s efforts haven’t undercut his group’s finances. “The AWRS membership of over 40 companies and associations is growing and strong,” he said. “We will continue to fight for America’s workers and to seek positive ways to strengthen America’s retirement system.” He declined to disclose the group’s members.
The unions are trying to stifle debate over the future of Social Security, Max said. “Certain organizations do not want to participate in this dialogue, and would rather resort to tactics that are beyond the pale of a fair and honest debate,” he said.
Roundtable Chairman
The business coalition remains intact, said David John, an analyst for the Heritage Foundation, which supports personal accounts. “It’s crumbling in some parts,” he said. “The really major business players, the major employers, are still actively involved,” John said, citing National Association of Manufacturers and the Business Roundtable. “If they start to falter then that starts to be serious.”
Schwab and Wachovia have signaled support for private accounts outside of their AWRS memberships, the AFL-CIO says. Along with companies including Fidelity Investments, Mellon Financial Corp. and Prudential Financial Inc., both participated in a commission convened last year by the Financial Services Roundtable, which represents banks, insurers and financial service providers.
In December, the panel recommended mandatory individual accounts “to supplement Social Security and address the impending shortfall.” Wachovia Chief Executive Kennedy Thompson will become chairman of the Financial Services Roundtable at the end of this month.
Schwarzenegger Connection
The ultimate goal is to get the companies to end their contributions to groups supporting Bush’s bid to create private accounts, the AFL-CIO’s Patterson said. “We’re pressing them to withdraw from all of the advocacy organizations as well as defining their position on retirement security,” he said.
The AFL-CIO is also targeting Schwab because of the company’s ties to California Governor Arnold Schwarzenegger, who said he’ll campaign for a ballot measure forcing all new state and local government workers onto 401(k)-type retirement plans.
Schwarzenegger’s proposal eventually could shift control of $300 billion of investments from state officials to money- management firms and end funding for the California State Teachers Retirement System and the California Public Employees’ Retirement System, the largest fund with $180 billion under management.
Chairman Schwab attended a private luncheon last month in San Francisco for a fund-raising committee called Citizens to Save California that was set up to support Schwarzenegger’s plan, according to the Los Angeles Times. Spokesman Mathison said Schwab attended but didn’t give money.