Privatizing Social Security

Emphasizing what I have said before, this is why privatizing social security is a bad idea. There are possibilities of good gains, but there is also great risks. The only persons who are guaranteed to make money are the stock brokers (1 Trillion dollars in fees over the next 70 years).

Frist Political Fund Can't Cover Bank LoanSenator's Investment in Stock Market Has Lost $460,000 in Value Since 2000 (Link)

By Dan Morgan and Brian Faler
Washington Post Staff Writers
Thursday, December 2, 2004; Page A02

A campaign fund controlled by Senate Majority Leader Bill Frist (R-Tenn.) has lost almost $460,000 in stock market investments since 2000 and now does not have enough to cover a sizable bank loan, according to federal election records and the manager of the Frist account.

The heaviest losses, totaling more than $500,000, occurred in a stock index fund in 2001 and 2002, years when the securities markets suffered a major downturn. But the Frist campaign account lost an additional $32,050 in July and August, a setback that was only partially offset by a gain of $11,472 in September, according to Linus Castignani, treasurer of "Frist 2000," which was created to finance the senator's successful campaign for a second six-year term in 2000.

Democrats yesterday seized on the reports of the losses, which were revealed by the Chattanooga Times Free Press.

Todd Webster, spokesman for outgoing Senate Minority Leader Thomas A. Daschle (D-S.D.), said in an e-mailed statement that the losses raised questions about a Republican plan to let Americans invest a portion of their Social Security contributions in the stock market.

"He still thinks we should put seniors' Social Security funds in the stock market?!" Webster said. In a departure from Senate protocol, Frist journeyed to South Dakota this fall to campaign for Daschle's opponent, John Thune (R), who narrowly won the election.

Campaign finance experts said candidates are allowed to invest their war chests in the stock market, although the practice is considered somewhat unusual. "There's nothing illegal about it," said Larry Noble, the executive director of the Center for Responsive Politics. "The profits go into the campaign. The losses come out of the campaign."

House and Senate candidates are required to disclose the gains and losses to the Federal Election Commission in campaign finance reports.

Castignani said he was confident that "as the market improves, so will this account." He said he had "full confidence in the market between now and the time we close the account at the end of Senator Frist's term in 2007."

Like many successful candidates, Frist had surplus funds in the account after his 2000 victory, and he decided to invest them, Castignani said.

Along with the Frist 2000 fund, the majority leader also operates a separate "leadership" account called Volunteer PAC, which he has used to support other Senate candidates.

Meanwhile, records show, Frist has continued to use money from the 2000 campaign account to cover various expenses.

Recent spending, for example, included $689.50 for flowers for a holding room for visiting dignitaries attending the funeral of former president Ronald Reagan, and $9,457 for "Senate gifts" from the Senate Gift Shop. Castignani said he did not know about the nature of the gifts, but he added that FEC rules allow federal officeholders to spend campaign money in support of official activities.

Records on file with the FEC show huge swings in the portfolio held at Charles Schwab & Co. Inc. In July, August and September 2001, for example, there was a loss of $178,260. In some months, there were small gains.

In August 2001, well after the campaign ended, Frist 2000 took out a variable interest rate loan of $360,000 from the Nashville office of U.S. Bank, at an initial rate of 4 percent.

There was a need for cash, Castignani explained, because bills for administrative and political expenses had to be paid from the account even though the money was tied up in the stock market. "Our investments had been made and were losing money, so if we had decided to sell the stock while it was down, the losses would have been permanent. Our hope is the market is improving and our losses will become less."

Nick Smith, a Frist spokesman, told the Chattanooga paper last week that the idea that Frist has received any preferential treatment on the loan was "absurd.'' It is now due in early 2007, when Frist, who has been mentioned frequently as a possible presidential candidate in 2008, is expected to retire from the Senate.

As of the end of September, Frist 2000 reported cash on hand of $312,807 and "debts and obligations owed" of $349,107. Castignani said, however, that this did not include the stock market gains of more than $11,000 in September.