"What I do not support and did not support previously was the investment of government funds, especially Social Security trust funds, in private securities, especially equities," Greenspan told the Ways and Means Committee of the U.S. House of Representatives.

Greenspan's comments may fuel opposition in the Republican-led Congress to Clinton's proposal, which calls for investing up to $700 billion of Social Security funds in the stock market and subsidize retirement savings accounts — the biggest change in the U.S. retirement system's financing since its inception 64 years ago.

The Social Security proposal was the major feature of Clinton's State of the Union address, delivered on Tuesday to a joint session of Congress.

Greenspan said government investment in private markets would interfere with the efficient allocation of resources in the economy.

"Because I do not believe that it is politically feasible to insulate such huge funds from a governmental direction, I'm fearful that we will use those assets in a way, which one, will create a lower rate of return for Social Security recipients, but even a greater concern, that it will create sub-optimal use of our capital resources and those assets which create our standard of living," he said.

The White House says its proposal was aimed at boosting returns to the Social Security system and helping keep it solvent through at least 2055 without benefit cuts.

But the proposal has already been rejected by Rep. Bill Archer of Texas, the chairman of the House Ways and Means Committee, and a major group of corporate leaders.

"Such direct investment runs contrary to the fundamental principles of democratic capitalism, and would result in undue concentration of assets in certain market segments, share price distortion, and market inefficiencies," the Business Roundtable said in a statement, urging Clinton to reconsider his plans.