<HTML> <HEAD> <META NAME="document_name" CONTENT="V000514-012099"> <META NAME="public" CONTENT="yes"> <META NAME="source" CONTENT="APO"> <META NAME="story_type" CONTENT="Financial"> <META NAME="ad_queue" CONTENT="/wp-srv/business/ap"> <META NAME="content_type" CONTENT="text"> <META NAME="keywords" CONTENT=""> <META NAME="embargo_date" CONTENT="19990120"> <META NAME="kill_date" CONTENT="19990203"> <META NAME="pub_date" CONTENT="19990120"> <META NAME="create_date" CONTENT="19990120"> <META NAME="event_date" CONTENT="19990120"> <META NAME="recv_time" CONTENT="199901201122"> <META NAME="hit_disp_date" CONTENT="Jan 20"> <META NAME="hit_disp_time" CONTENT="11:22 a.m."> <META NAME="selection_code" CONTENT="General U.S. and International financial/business news"> <META NAME="sel_code_num" CONTENT="1310"> <META NAME="story_priority" CONTENT="Rush"> <META NAME="slugline" CONTENT="AP-Economy-Greenspan"> <META NAME="version" CONTENT=""> <META NAME="reference" CONTENT=""> <META NAME="word_count" CONTENT="1"> <META NAME="categories" CONTENT=""> <META NAME="companies" CONTENT=""> <META NAME="sld" CONTENT="V"> <META NAME="category" CONTENT="f"> <META NAME="format_area" CONTENT=""> <META NAME="format_identifier" CONTENT="DC3 DC1"> <META NAME="editors" CONTENT="">  <TITLE>Greenspan Faults Soc. Security Plan</TITLE> </HEAD> <body background="/wp-srv/globalnav/images/news_bg.gif" bgcolor="#ffffff" link="#333399" alink="#9999CC" vlink="#6666CC"> <A NAME="TOP"></A> <table width="590" border="0" cellspacing="0" cellpadding="0"> <TR> <td valign="bottom" align="left" width="116"><a href="http://www.washingtonpost.com/wp-srv/maps/artbanner.map"><img src="/wp-srv/globalnav/images/panicbttns.gif" width=116 height=65 border="0" alt="The Washington Post" ISmap></a></td> <td width="6"><img src="/wp-srv/globalnav/images/spacer.gif" width="6" height="10" border="0" alt=" "></td> <td valign="top" width="468"><A HREF="http://www.washingtonpost.com/RealMedia/ads/click_lx.ads/search.washingtonpost.com/wp-srv/business/ap/7061/TopLeft/ETR-ROS-4/etrd8mo1_468nw.gif/63306538316531343334653139346330" target="_top"><IMG SRC="http://www.washingtonpost.com/RealMedia/ads/adstream_lx.ads/search.washingtonpost.com/wp-srv/business/ap/7061/TopLeft/ETR-ROS-4/etrd8mo1_468nw.gif/63306538316531343334653139346330" WIDTH=468 HEIGHT=60 ALT=" Search more than 4000 Mutual Funds @ E*Trade(R). 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Security Plan </B><P></font>  <font size="-1"><I>By Martin Crutsinger</I><BR></font>  <font size="-1">AP Economics Writer<BR></font>  <font size="-1">Wednesday, January 20, 1999; 11:22 a.m. EST<P></font>  WASHINGTON (AP) -- Federal Reserve Chairman Alan Greenspan today criticized a key part of President Clinton's Social Security rescue plan, saying the government could damage the economy by investing huge sums of money in the stock market. <P> Greenspan, an influential voice Congress often turns to on economic matters, said he supported Clinton's major idea to put 62 percent of the government's budget surpluses into Social Security's cash reserves. <P> But he said he had serious objections to a a provision allowing a government board to direct about a quarter of those savings into stock market investments. It is unlikely that these investments could be insulated from political considerations, he said. <P> Rather, Greenspan said it is more important to use budget surpluses to reduce the federal debt as a way of boosting the national savings rate. <P> Clinton's plan would invest about a quarter of the surplus earmarked for Social Security in the stock market, a first for Social Security, in hopes of getting a higher return. The rest of the money would be kept, as the retirement system's reserves have been, in safer but historically lower-yielding Treasury bonds. <P> Clinton suggested establishing an independent board -- insulated from political pressures by, perhaps, long terms in office -- to choose the investments, with the board's options limited to relatively neutral investments, such as stock index funds. <P> But Greenspan said no system designed to insulate investment decisions from political pressures is foolproof. <P> The government's channeling trillions of dollars over the years into U.S. companies would eventually lower America's productivity rates, the key to rising standards of living, because of pressures to help less efficient industries rather than letting market forces decide what companies to fund, he said. <P> ``I do not believe that it is politically feasible to insulate such huge funds from government direction,'' Greenspan told the House Ways and Means Committee. ``I am fearful that we would use those assets in a way that would create a lower rate of return for social Security recipients and even greater concern it would create sub-optimal use of capital and a lower standard of living.'' <P> <CENTER><P>© Copyright 1999 The Associated Press<P><A HREF="#TOP">Back to the top</A></CENTER> </TD> </TR> <tr align="left" valign="top"> <td><img src="/wp-srv/globalnav/images/spacer.gif" width="124" height="25" border="0" alt=""></td> <td><img src="/wp-srv/globalnav/images/spacer.gif" width="20" height="25" border="0" alt=""></td> <td><img src="/wp-srv/globalnav/images/spacer.gif" width="446" height="25" border="0" alt=""></td> </tr> </table>  <TABLE WIDTH="590" CELLPADDING="0" CELLSPACING="0" BORDER="0"> <TR> <td width="590" colspan="3" valign="top" align="left"><A href="http://www.washingtonpost.com/wp-srv/maps/global_nav.map"><IMG src="/wp-srv/globalnav/images/global.gif" width="590" height="15" border="0" alt="Navigation Bar" ISmap></a><br> <A href="http://www.washingtonpost.com/wp-srv/maps/polnav.map"><IMG src="/wp-srv/globalnav/images/globalnav4.gif" width="590" height="13" border="0" alt="Navigation Bar" ISmap></a></td> </tr> <tr> <td>  </td> </tr> <tr> <td width="120" align="left" valign="middle"><a href="/wp-srv/yp/front.htm"><img src="/wp-srv/globalnav/images/yp_genarticle.gif" width=110 height=24 BORDER="0" alt=""></a><br><img src="/wp-srv/globalnav/images/clearspc.gif" width="120" height="1" alt=""></td> <td width="234" align="left" valign="top"><A HREF="http://www.washingtonpost.com/RealMedia/ads/click_lx.ads/search.washingtonpost.com/wp-srv/business/ap/14923/Left/NXC-ROS-2/nxc2-t19noanim234.gif/63306538316531343334653139346330" target="_top"><IMG SRC="http://www.washingtonpost.com/RealMedia/ads/adstream_lx.ads/search.washingtonpost.com/wp-srv/business/ap/14923/Left/NXC-ROS-2/nxc2-t19noanim234.gif/63306538316531343334653139346330" WIDTH=234 HEIGHT=60 ALT="NextCard Internet Visa - Apply Now" border=0></A></td> <td width="236" align="right" valign="top"><A HREF="http://www.washingtonpost.com/RealMedia/ads/click_lx.ads/search.washingtonpost.com/wp-srv/business/ap/18653/BottomRight/TRK-ROS-2/tka2-trffc234.gif/63306538316531343334653139346330" target="_top"><IMG SRC="http://www.washingtonpost.com/RealMedia/ads/adstream_lx.ads/search.washingtonpost.com/wp-srv/business/ap/18653/BottomRight/TRK-ROS-2/tka2-trffc234.gif/63306538316531343334653139346330" WIDTH=234 HEIGHT=60 ALT="" border=0></A></td> </TR> </TABLE> </BODY> </HTML>