President Obama plans to unilaterally create a new middle-class/working-class savings plan he calls the "MyRA" (intended to invoke Individual Retirement Accounts, presumably, rather than the Irish Republican Army).
Considering how government programs shift, mutate, calcify and create new political dynamics, you could imagine plenty of interesting consequences from such plans.
If Obama successfully gets regular people to pour tens of thousands into a retirement account propped up by government debt, it gives Democrats a new — and very compelling — angle for advocating tax hikes: Hike taxes on the rich or endanger the savings of these working-class people!
As MyRAs grow, the savers are supposed to shift into regular IRAs. If suddenly many modest-income people of modest wealth have significant savings in Wall Street, won't our bailout trigger get quicker?
Republicans constantly express the hope that making more people investors will make more people Republican, because owning stock is correlated with voting Republican.
Alternatively, will this plan just subsidize more savings for the upper-middle-class folks making $150,000?
Amid all these questions, the early reaction from Wall Street's lobbyists is positive, The Hill's Peter Schroeder and Justin Sink report:
Several trade groups for the financial industry welcomed the move. The Investment Company Institute said Obama’s approach “can complement the existing vibrant and competitive private sector retirement offerings.”
The Securities Industry and Financial Markets Association (SIFMA) — one of the most powerful lobby groups for Wall Street — also endorsed the plan. ...
SIFMA heaped praised on the Treasury's efforts in to create program, which has been in the works for years.
“Treasury has been wonderful in trying to figure out a solution that would not harm the current private system,” said Lisa Bleier, the group's managing director.
The warm response is likely a reflection, in part, of how the program is designed.
Once a myRA retirement plan reaches $15,000 or 30 years, whichever comes first, workers would have to roll their government plan into a private sector Roth IRA.
That rule could create a stream of new business for investment banks over time.
In addition, households making more than $191,000 won’t not be eligible for the program, which means the government isn’t encroaching on the wealthy customers who fuel the investing business.
Furthermore, administration officials made clear Wednesday they do not plan to manage the fund in-house. Instead, the administration will be shopping among 15 to 30 financial firms to determine who will run the fund for them.