May 23, 2011
Almost everyone that is not making $millions has been affected by the economic collapse of 2008, and we don’t want it to happen again. The loss of the Glass Steigle restrictions has destroyed many banks and hurt investors not only here but throughtout the world. We must reinstitute the regualtions that separate risk from savings by stopping traditional banks from engaging in sttrading and risky investmentys. We must also have clear disclosure of investments and the scope of the investment risk. The ability of borrowing and investing on very thin margins has also hurt banks and will create a new economic disaster. All of the rules created by the SEC during the last 70 years must be restored to protect average citizen like me.
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,
David Greene