Subject: Comments for File Number S7-12-11

May 19, 2011

As a 55-year-old contract worker, Iím writing because my family and I were affected by the economic collapse of 2008, and we donít want it to happen again.

The large company for which I was working on contract during 2007, '08, '09 and '10 had never had a large-scale layoff in its almost 35-year existence. However, in 2009 and '10, not only were contract workers (including me) released, but thousands of highly educated and experienced full-time workers were laid off, as entire projects were cut. This disaster--and the larger disaster of which it was a small part--was entirely precipitated by the dangerous banking and finance practices encouraged by Wall Street; practices that continue, unabated, to this day.

It was bad enough to be out of work and out of money; it was even worse to know that billions of taxpayer-dollars (paid in by people who now needed the cash, themselves) went to bail out banks because of the bankers' dishonest and risky policies. But to find that these policies and practices were allowed to continue, and were even rewarded with enormous (to people like me) bonuses, was utterly unbelievable! No wonder the American middle class--what's left of it--is losing faith in government! If our ever-increasing taxes cannot protect us from the white-collar criminals that populate Wall Street and wipe out our savings and our retirement plans, then what are we to trust?

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 off its bond debt), the bigger the spread on credit default swaps.

In addition, the practices and bonus plans of financial institutions should be transparent to their investors and their customers--we should know what we are paying these people to do. There should be accountability structures in place; people in positions of responsibility should know that they can be prosecuted for the unlawful practices encouraged--or demanded--by their bizarre bonus plans.

Thank you for considering my comment,

Sherry Bupp