Occupy Wall Street’s message: more than a sound bite
By David Callahan The opinions expressed are his own.
Pop quiz: What’s so bad about the financialization of the U.S. economy over recent decades?
If you’re like most people who are uneasy with the outsized power of finance, chances are you can’t boil down your concerns to a pithy sound bite. So why is there such ridicule of the protesters “occupying” Wall Street for lacking a coherent message?
Three years after the 2008 financial crisis, it is still hard to neatly encapsulate the problem with letting bankers and traders dominate American economic life. Once Congress passed the Dodd-Frank reform law last year, most political leaders and commentators moved on to other issues, leaving behind an unfinished debate about Wall Street’s influence.
Now, thanks to protests in New York and a growing list of other cities, this debate is percolating once more. And guess what: the supposedly incoherent protesters actually have a pretty strong critique of what is wrong with America’s financialized economy.
Angus Johnson, one of the most astute bloggers following the protests, wrote recently that if you think that the protesters have “no message, you’re not paying attention.” They clearly believe that there is “something seriously broken” in America’s economy and politics and that “an accelerating concentration of wealth and power in the hands of a small minority” is to blame.
That reading jives with my own visits to Zuccotti Park – aka, “Liberty Square” – just blocks from the New York Stock Exchange. The clear thread linking a mish-mash of grievances – on everything from education to healthcare to corporate campaign cash – is that the wealthy are running America at the expense of ordinary people.
Writing history – the Panic of 2008
– John Kemp is a Reuters columnist. The views expressed are his own –
Economic history is the only field of human endeavor where the past changes as much if not more than the present and the future. Policymakers and practitioners struggle to define and write a “narrative” of the past as a means to control how policy responds to current and future problems.
The debate now over financial reform is a case in point. Even though the banking system has only just emerged from the most severe shock since the 1930s, the battle over how to define the events of the last 18 months, and what they should mean for investors and regulators in future, is already well underway.
Contrasting speeches last week by Federal Reserve Governor Kevin Warsh and Bank of England Governor Mervyn King illustrate the two extremes around which the debate is polarizing:
The financial sector will exploit these differences to derail any fundamental overhaul of regulation.
Hey Dan, I feel ya! I’m glad I won’t be around should such a mess come to pass.
Leave pay to companies, shareholders
– James Pethokoukis is a Reuters columnist. The views expressed are his own –
For the populists who really, really want to make Wall Street pay by slashing their pay, Treasury Secretary Timothy Geithner certainly isn’t giving them what they want.
Yes, the top executives of the remaining TARP firms seem destined to be salary serfs to the “pay czar”, Kenneth Feinberg.
Of course, it’s hard for even the most die-hard free marketeer to feel sorry for financial firms that mismanaged their businesses terribly, took government bailout money and now find themselves under Uncle Sam’s thumb.
But as for everyone else? Well, here’s how Geithner put it: “We are not setting forth precise prescriptions for how companies should set compensation which can often be counterproductive. Instead, we will continue to work to develop standards that reward innovation and prudent risk-taking, without creating misaligned incentives.”
Even worse for those who wanted the Treasury secretary to bring down the hammer, he went on to highlight how the financial sector is already making changes on pay and how he looks forward to a “continuing conversation”. Yes, self regulation in action! Hardly what the torch-and-pitchfork crowd craved to hear.
That’s just too bad. To his credit, Geithner seemingly understands his goal isn’t to punish, but to play a constructive role in nudging financial industry compensation in a direction that better connects risk and reward.
The US needs to stop supporting a corporate aristocracy. The gross and outrageous compensations for some of these Top Managers is nothing more than the US paying to support these individuals in a lifestyle they have become accustom to. By no means are these individuals worth this much to the corporation. No one could be worth these kinds of compensations. Some are over 400 times the average compensation of their employees. No corporate board could begin to justify that one person is worth that kind of compensation. Yet, that kind of compensation exists today in publicly traded corporations. What else would you call it but the support for a corporate aristocracy?
Publicly traded companies fall under federal laws. The Government does not have to “own” a piece of them to set rules upon them in order to protect the public.
The compensation of top management should be tied to the compensation of the average employee. Let’s face it they all had a part of the success or failure of the business. Some countries have put limits on publicly traded company’s top management at 10 times the average employee compensation. Compensation would include salary, stock options, and bonuses. To compute this they take middle management, front line managers and their employees including all secretarial and office administrative staff and average their total compensation. No one in upper management can make more compensation than 10 times this amount. This value is recalculated each year to set limits on the next year. Within this limit salary, stock options and bonuses are paid. If upper management wants a raise, they need to raise the compensation of their employees.
This type of pay limitations provides incentive for profits and efficiency while ensuring the benefits of a job well done are given to those that do a good job. These benefits will flow up a year later. And I am all for upper management being given incentives to think in terms of the long haul by withholding some pay in the form of stock purchases.
I for one am against maintaining a corporate aristocracy. We need fiscal responsibility forced back upon the corporate industry.
U.S. mouth writing checks its body won’t cash
– James Saft is a Reuters columnist. The opinions expressed are his own –
A look at credit insurance prices for U.S. banks shows that market thinks the government’s mouth is writing checks its body can’t or won’t cash.
Despite a blistering rally in bank shares and Herculean efforts by the U.S. to build confidence in its financial sector, the price of insuring some leading banks’ debt against default has increased markedly in recent weeks.
That tells us that bond investors have serious doubts about the popular perception that the United States won’t allow systemically important institutions to fail, or in saving them in some form won’t make bond holders take substantial losses.
Since the KBW index of bank shares began a 65 percent rally on March 6 the cost of insuring Citigroup for five years via a credit default swap has risen to an annual payment of 627 basis points from 470, meaning it costs 6.27 cents to insure every dollar. Wells Fargo 5-year CDS stand at 292.5 basis points, as against 240 on March 3 and 120 at the end of December, while Bank of America’s ended last week at 355, exactly where it was on March 6 but 50 above its March 3 level.
The people buying this insurance fear if a big bank fails over the coming five years, or needs further buttressing with public money, the bill will be too large for the U.S. to bear, either politically or otherwise. That implies that there could be burden sharing by creditors, either through some sort of divvying up of the remaining assets or through forced or government orchestrated conversions of debt into equity.
OPTIONS
The US came off the gold standard and now has gone over to the debt standard. The actual price of something means nothing anymore. The buyer only looks at the payment amount and wants immediate gratification regardless of the price. This is the basis for the inflation that has crushed the USD.
Great Article David, I have written my congressmen, I have called, I have submitted ideas to the Super Committee and my voice has not been heard. It is easy for members of Congress to delete my emails and throw my letters in the trash. It is not as easy to ignore me when I join the thousands of others on Wall Street. There are so many issues to be resolved and this group is in its infancy. Issues will come forth, demands will come with solutions that are feasible, then a leader will emerge. This is a force to be reckoned with. It represents a cross section of the majority of Americans who are feeling the effects of unregulated Banks and financial institutions who were left to do as they wished with no oversight. Corporations have made record profits along with their CEO’s while the american workers have seen reduced salaries, job cuts, and benefits taken away. This is a revolution that will address the lobbyists who are buying our politicans favors and we will demand reform. The two party system has been reduced to nothing but political pandering with the Republican party using financial sabotage to take down the President at the expense of the health of the American economy. The majority of the people have wised up and realize this movement is necessary to put pressure on tax reform for Corporations and institute tax hikes on goods made overseas. Bring jobs back to America, and make those CEO’s who have reaped the largest profits on the backs of the Ameican workers bring their salaries back in line, so the workers can have living wages. I have a whole list of issues I want addressed. I will not stop working for solutions…I believe one voice can make a difference and thousands can and will change the course of American politics!
Maria Madero