May 19, 2011
I’m writing because my family and I were affected by the economic collapse of 2008, and we don’t want it to happen again.
As a small business owner, my meeting and event planning business has been in the dumps since October 2008. I am unable to collect unemployment and I do not even figure in the numbers of people unemployed, though I am technically unemployed. Luckily I had some savings, which are now running out. I have no idea how I am going to pay my rent. I went from having no debts to being $10,000 in debt. And I see these people rewarding themselves with 6- and 7-figure bonuses. They should be made to live as they have forced so many to live for the past almost 3 years. But, no, they continue to reward themselves for running our economy into the ground.
Wall Street greed and outrageous pay practices were a major cause of the collapse. One way to change the incentives so they don’t collapse our economy again would be for regulators to use a *safety index* for incentive compensation, instead of a profit index.
Currently, most bankers receive stock options. So if they can generate more profits, the stock price goes up, and their options become more valuable.
Instead, what if they used the bank’s bond price, which measures the overall ability of the bank to repay its own debt? Another measure of bank stability is the spread on credit default swaps (the insurance-like policies that are essentially bets, where one gambler bets with another that a particular firm will fail). The closer a bank comes to failing (such as in failing to pay of its bond debt), the bigger the spread on credit default swaps.
Thank you for considering my comment,
Karla Gantt