Many people disagree with President Clinton's proposal to invest Social Security money in the stock market.
But there are also local governments looking to the stock market to help them fund their pension plans.
The City of Providence, R.I., is seeking authorization from the state government to borrow $325 million to invest in the stock market and help save the city's financially troubled pension system.
The new idea is known as municipal arbitrage.
The city issues securities called pension obligation bonds and invests the proceeds in the stock market.
If the stock returns are higher than the rate of return owed to the bond holders, the city makes money.
But it could also lose money if the stock return is lower than the bond interest rate.
Providence Mayor Vincent A. Cianci Jr. is behind the plan. But City Council President John J. Lombardi said he's holding back his approval, waiting to get more information on the deal.
"We're at ground zero. No one has explained anything to us," he said.
Boyce Spinelli, director of finance for the city, said, "If we could borrow at a low enough interest rate it would work well."
The bonds are not tax-exempt, which would force the city to pay a higher interest rate than on other tax-free municipal debt.
However, Mr. Spinelli points to the city of Worcester, Mass., which sold pension obligation bonds with an interest rate of 6.3%.
"We felt over a 30-year period the risk was worth taking," he said.
"If we only had seven to 10 years left on the liability, we wouldn't consider it," said Mr. Spinelli.
In its current situation, the city's pension system -- which has high cost-of-living adjustments, an unusually high number of disability pensions, and small contributions from the city -- is expected to go broke in about 15 years.
The bonds are considered a way of saving it.
Mr. Spinelli said the plan "is not irresponsible if it's done right. There are safeguards built into the legislation.
"We would like to have projected savings in each and every year."
An actuary will compute the projected amortization.
Mr. Dalton acknowledges that "there is controversy, and the plan is not without risk. But because of the way the stock market is performing now, more people are willing to take risk."