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Address by ARTHUR LEVITT, Chairman, U.S. Securities and Exchange Commission
Delivered to the John E Kennedy School of Government Forum, Harvard University, Cambridge, Massachusetts, October 19, 1998
Thank you for that generous welcome. I want to express my thanks to Dean Joe Nye and Graham Allison and to everyone at the Forum for making my day here at Harvard so enjoyable.
For anyone who works at the SEC, coming to Harvard is very much a pilgrimage. It is no exaggeration to say that Harvard University produced the founding fathers of the laws that regulate America's capital markets. Early in 1933, President Roosevelt asked Felix Frankfurter, then a professor at the Law School, to come to Washington and write the nation's new securities legislation.
Frankfurter brought three of his Harvard associates: John Landis, Thomas Corcoran and Ben Cohen. By the end of 1933, each would become a national celebrity and a symbol of the New Deal.
Drafting this historic legislation was, by no means, an easy task for Felix's "Happy Hot Dogs," as they were called. The competing forces of Capitol Hill, the Courts, and of course, those within the industry tested the group's intellect and patience. But they kept their focus on two important goals: to increase both investor protection and investor confidence.
It's fair to say that they succeeded. Today, America's capital markets are the envy of the world. Their resiliency, transparency and efficiency stand second to none. A culture of nondisclosure has been replaced by full-disclosure; reckless self-interest has been tempered by the public interest.
Today, I want to talk to you about the SEC perspective on investing Social Security in the stock market.
Few dispute that Social Security reform is necessary. Social Security benefits are projected to exceed revenue from payroll taxes within 15 years. By 2032, the Social Security Trust Fund is expected to be depleted. Three basic options exist to close this gap between benefits and revenue, and thereby, extend the life of the Trust Fund: reduce benefits, increase revenue, or raise the expected rate of return for contributions through investment in the stock market and other private-sector securities.
Not surprisingly, almost every reform proposal involves some type of market investment. For the most part, these proposals draw upon two basic ideas (1) having the government invest the Social Security Trust Fund in the stock market; and (2) allowing individuals to invest a certain percentage of payroll contributions in an individual private account.
I am not here today to support any …