Tuesday, February 01, 2005
Charles Schwab
The Charles Schwab Corporation
101 Montgomery Street
San Francisco, CA 94104

Dear Mr. Schwab:

I am writing this letter as both a client and customer of Charles Schwab and a shareholder representing 86,900 shares.

I am concerned that the plan by the George W. Bush Administration to partially privatize social security is short-sighted, foolish, and could possibly destroy the stability and solvency of our social security program and the Social Security Administration.

Recently, numerous financial services companies, professional organizations representing corporate management, and other business groups have announced support for creating personally-directed accounts to invest social security assets in mutual funds. The Charles Schwab Corporation has been identified as a member of this group. Clearly, this is self-serving, and is intended to allow the financial services industry to gain access to public funding of social security. This position is despicable and will negatively impact the industry. It is also another example of greedy corporate management feeding at the public trough. It exemplifies “welfare for the rich” and is yet another corporate subsidy.

Several studies have indicated that professional investment managers managing qualified retirement accounts generally out-perform individuals managing their own 401(k) and other self-directed qualified pension plans. Inevitably, individuals will be susceptible to deceptive mutual fund performance advertising, which often exaggerates positive performance. This will lead to a loss of retirement assets, as individual investors chase performance. Individual investors often move from one fund to another in the quest for short-term financial gain. This will lead to not only numerous bankrupt individual plans, but lead to bankrupting social security for those not investing their own assets.

A much better approach would be to create a nationally appointed and/or elected board, similar to CalPERS and CalSTRS, to serve as fiduciaries, covered by ERISA, with trustees personally financially liable, to manage social security assets. Such a board could also be authorized to invest in a diversified portfolio, including equities, to maximize performance.

I urge you to take a leadership role in opposing the privatization of a major national retirement program that has well served the people of the United States in their retirement years for several generations.


John Harrington

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