May 24, 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. I was disabled after leaving the government to work as a contractor in 1986 when my job was contracted out. Since then I have worked on a limited basis and finaly had to quit working and depend on my investments. I invested conservatively the best I could learning as much as I could as I went along. I have had quite a few surgeries. I lost about 30% of my savings even though they were conservative. My husband as well and we know we were not hit the worse. I am still invested, slightly more conservatively and pay the majority of my monthly amount to health care. Everytime I listen or read about these people and realized how many people have lost their homes or life savings I am disgusted by them. We are losing democracy and moving into an oligarchy. I am not knowledgeable enough to give profound advice about this, but I really want to see these people having to obtain a large proportion of their compensation in such a way that they will have a very strong interest in making sure that the company is run well and ethically. No buy outs because they know its going down. No bonuses after they have made quick money and are moving on. Tax them, no one should be making billions when they are hurting society.
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,
Linda Milgate