Subject: Comments for File Number S7-12-11

May 19, 2011

Iím writing because my family and I were affected by the economic collapse of 2008. The economy of the state of Hawaii crashed so badly that every hospital across the state was either laying off workers or instituting hiring freezes. The hospital where I worked as a REGISTERED NURSE, laid off 15% of its work force across the board, NURSES INCLUDED. Patient care suffered and has yet to recover. For my part, I lost my job and was unable to find alternate work in the islands. I had been in school for advanced degree as well at the time. I had to give everything up to relocate to where I could find work. I was laid off from the relocation job as well, barely six weeks after my hire. Now I am employed again but the relocation has also taken my children away from their familiar schools and friends in Hawaii to a whole new environment here on the mainland. Even with all of this upheaval I count our family more fortunate than most. The economic crisis is the equivalent of a natural disaster in its destruction. But unlike natural disaster it can be prevented.

Wall Street greed and outrageous pay practices were a major cause of the collapse. One way to change the incentives so they donít 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 bankís 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.

Executive compensation based on safety indices such as these is essential to preventing future crashes. Compensation based on profitability has proven itself to be nothing more than an incentive to gamble and cook the books.

I also think that the bank officials who made the decisions and deals that brought about the crash should be criminally prosecuted. Their personal assets should be garnished and used to pay the debts that their gambling with other peoples' money created. They should never have been bailed out by the taxpayers. That was an unconscionable crime and economic terrorism against this nation.

We must never let this happen again. There should be no such thing as too big to fail. Those who made the disaster must pay the price.

Thank you for considering my comment,

Deborah Brody Chen