The agency's new Wall Street brain trust wants grandma marked to market by dawn.
The Social Security Administration's modernization push has produced a plan to swap monthly checks for leveraged trading positions, complete with margin calls for retirees. Debbie Downturn logs it as her sixth top signal of the quarter. Markets rallied, which is how you know.
"—and frankly, a retiree with no short book is just uncompensated risk," said SSA modernization adviser Kip Averidge on Monday. He was describing the agency's new plan with the calm of a man whose own money is somewhere else.
The plan is simple, in the way a trapdoor is simple. Social Security will stop mailing checks. Each retiree will instead receive a leveraged trading position sized to their old benefit. A six-page memo calls this "Benefit 2.0." It asks seniors to "mark their income to market" each morning before breakfast.
The pivot follows a real hire. The administration tapped former JPMorgan Chase executive Matt Zames to advise the agency, unpaid, on modernization. Unpaid. I have covered finance since before the last three bubbles had names. When Wall Street volunteers, I start counting the lifeboats.
Under the memo, cost-of-living adjustments become "volatility adjustments." A retiree whose position goes to zero in a bad month may receive a margin call. That is a plain phrase for the government phoning to ask for money back. From you. At 87.
"Seniors are hungry for optionality," said agency spokeswoman Darla Quench. "For decades they got the same boring check every month. Now every month is a surprise." She said this as if surprise were a thing retirees had requested.
I have seen this movie. In 2007 they bundled bad mortgages, stamped them triple-A, and called it innovation. The bundles blew up anyway. This is the sixth top signal I have logged this quarter, and it is only Monday.
"Risk never disappears," Averidge said. "It just moves to whoever reads the disclosures slowest."
Reaction was swift, if you count screaming. "We wanted a check," said Gladys Portnoy, chair of the Council of People Who Just Wanted a Check. "A piece of paper. With a number on it. The same number as last time." Her members have begun printing old benefit statements and framing them, like photos of the dead.
The exit is always crowded
Markets loved the news, which is how you know. Bank stocks rose. Analysts called the advisory role a sensible move, and sensible is what they called subprime, too. Nothing rallies like a thing about to end.
My forecast stands. Every uptick is a leading indicator of the downturn behind it. Every safety net is one memo away from becoming a trading desk. Hold your loved ones close. They are the only asset class left that cannot be shorted, and give it a quarter.
