As the December '98 "White House Conference on Social Security" got under way, two men slipped into the meeting hall and took seats together in the very last row of the audience. They were Marc Lackritz, president of the Securities Industry Association (SIA), and Matthew Fink, president of the Investment Company Institute (ICI), representing investment banks, brokers and the mutual fund industry. Unobtrusively, they watched President Clinton, assorted members of Congress and a wide range of experts and interest groups debate the future of the $500-billion-a-year Social Security system.

An insistent part of the debate is a proposal to privatize one-sixth of the system, funneling at least $80 billion a year into privately held accounts that would invest in stocks, bonds, mutual funds and money-market accounts. Of that $80 billion, something like 5 percent would be eaten up in bureaucratic and administrative costs, investment and management fees, and enforcement and compliance costs, with financial-services companies and investment houses pocketing $1 billion or more of the $4 billion total. And that would be just the beginning, since, once privatization of Social Security began, pressure would grow over time to complete it. In all, trillions of dollars are up for grabs; already Social Security accounts for a larger portion of the federal budget than the Pentagon and will rise exponentially decade after decade.

In his State of the Union speech, President Clinton fired the first shot in the battle, proposing to use the projected budget surplus to bolster the existing Social Security system. He avoided support for the private accounts privatizers want but, in a nod to free-marketeers, proposed investing part of the system's reserve funds in stocks and bonds and suggested a separate system of government-aided private accounts over and above Social Security.

That the partial dismantling of the crown jewel of Franklin Roosevelt's New Deal is even on the table is due, in large part, to a sophisticated effort by Wall Street and its conservative allies in both political parties. Yet, like Lackritz and Fink, the financial-services industry--not only Wall Street but banks and insurance companies--is trying to keep out of sight. Fearful of being accused of trying to gorge itself, vulturelike, on the carcass of Social Security, the money men are instead maneuvering quietly, behind the scenes, to guide the debate over privatization. "Everybody perceives that we have an enormous self-interest here," says Lackritz.

In reality, Wall Street's fingerprints are everywhere. Some firms, like State Street Boston, PaineWebber (along with the ubiquitous Pete Peterson of the Blackstone Group) and the SIA, are frankly backing privatization; others, like Merrill Lynch, Fidelity, American Express and ICI, are operating more quietly, financing academic studies and providing technical expertise to Congress and the White House. And most important, since 1995 Wall Street has helped to shape the debate by supporting a series of think-tank blueprints that have now been adopted as revealed truth by the GOP and many middle-of-the-road Democrats, while seductively tempting the White House.

Donald Marron, the PaineWebber CEO, says he'll be lobbying moderate Democrats to endorse the concepts contained in the leading such blueprint. Describing the plan as "the 2 percent solution," Marron says "we can bring around almost anybody on this."

As the 106th Congress begins its work, Social Security reformers have pushed the topic to first place on the agenda. Both President Clinton and the GOP say that fixing Social Security is the most important issue on Congress's plate. The very fact that Social Security has assumed so prominent a position on Congress's to-do list is a tribute to the power of the privatization lobby, since the ballyhooed crisis in the system will not occur until at least 2032.

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