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.
Many in America are reeling from the impact of unethical practices on Wall Street, among the huge banks such as Bank of America, and from the actions taken by corporations who somehow justify the idea that the wealthy minority deserve more and more while the majority struggles to live from day to day, month to month. The imbalance of wealth in this country needs to be fairly addressed so that all Americans can retain the hope and drive to succeed and live comfortably.
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,
Corinne Van Houten