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.
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.
I don’t believe many lawmakers understand how hard some of us have been hit by the recklessness, greed and deregulation of corporations, banks and Wall Street. My husband and I are still reeling. We may have to file bankruptcy. We may lose the home we have had for nine years, the home we had hoped to sell at a profit and use that money for retirement. Our home’s worth is currently below our mortgage amount—by quite a bit.
We are both self-employed in the housing market. We had to let all our employees go. We are behind on bills, including medical bills. We cannot afford to go to the dentist or doctor. We ration our medicines to make them last longer. We are rationing our heat so we don’t have to pay to refill our oil tank again this year. We used up our cash and credit for medical bills, living expenses and trying to keep our business going, our licenses current and a little bit of advertising.
I don’t know what more I can say. It’s really bad. Business has slowed to nearly zero for us yet I see politicians siding with Wall Street, with big oil companies, with big Pharma, with insurance companies, with banks. Very disappointing and discouraging.
Thank you for considering my comment,
Karen Hunt