May 27, 2011
I’m writing because I and thousands of others were affected by the economic collapse of 2008, and I don’t want it to happen again.
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.
My IRA’s sank and I don’t think I’ll see 5.00% in the few years I have left. I get infuriated when I see the C/D and MMA rates in the newspaper: 20%, .60% and perhaps you can get l.00% if you invest (?) for 2 or 3 years……outrageous.
I remember back in the 60’s when the banks considered customers to be the cause of their existence. I worked for a major NYC bank and it was all about the customer. The slogan of that time was “the customer is number 1, the customer pays our salary”. Boy, how times have changed.
Thank you for considering my comment,
Connie Brady
Las Vegas, NV