Advice to Geithner on the Bank Bailout
No, I have no advice on how to solve the crisis in the financial sector. I am not an economist. I barely understand how the banks got into this mess, much less what it will take to stabilize them and free up credit. However, I do understand populist anger at Wall Street. That anger was also aimed at Bush’s Treasury Secretary, Hank Paulsen, and Fed. Reserve Chair, Bernanke–and the Bank Bailout. The new Treasury Secretary, Tim Geithner, has not only inherited the mess, but the anger. People feel they have been ripped off.
So, here is my advice on gaining the trust of the American people, Mr. Geithner (something your own tax problems, however understandable, did nothing to help).
- Adding transparency to the process is a big step in the right direction. Keep it up. Enforce it strictly. Keep the website up where people can track the dollars used and which banks are doing what with them.
- Force all institutions which take the government money (Citigroup, Bank of America, etc.) to FIRE their top tier of executives for being the morons that got their institutions into this mess. Americans who have watched their retirement funds in 401k accounts lose 50% of value in the last 6 months are FURIOUS that the people who generated this mess are still in charge.
- The Executive Compensation cap at $500k per annum is a good first step, but it should be stricter. NO ONE working at any institution receiving bailout money should get more that $100K per annum–nor more than 10 time the lowest paid employee at the institution.
- No bonuses should be allowed until the institution is stable and ALL of the taxpayer money has been paid back with interest. A Bonus is something given for success, not failure. Stop these institutions from giving cash rewards under other names than bonus, too. Anyone taking government money who breaks such rules should be prosecuted for fraud. Same as with those who use taxpayer money on Super Bowl parties, corporate jets, etc.
- If the banks and other financial institutions cannot abide by these rules, threaten to nationalize them.
- The public should be reassured that this bailout money is a LOAN, not a gift. The loans must be paid back with interest–or the government takes over the institution. OUR money comes with strings attached.
- Be sure the public understands the re-regulating of the financial industry and how the new regs will make it harder for such problems to occur again. I would urge Congress to pass a new version of the old Glass-Steagal Act (abolished in the ’90s–this part of the financial mess IS Clinton’s fault for signing this into law) which created a barrier between ordinary banks and investment banks–so that high risk investments could not take down the entire financial sector and endanger grandma’s savings at her local bank.
- If you really believe nationalization to be a mistake, explain WHY in clear, easy language that ordinary Americans can understand. I think most of us were raised to believe that bankers could better run their businesses than a government committee–but the recent behavior has shaken that belief. I mean, I think my dog could run things better than the geniuses who are currently in charge!
- If nationalization is not the way to go, should banks, or, at least LARGE financial institutions, be regulated like public utilities–complete with public commissions? Why or why not? In terms grandma can understand, please.
- If you are afraid to follow UK Prime Minister Gordon Brown’s example and order the banks to begin lending again, because you don’t want them repeating the error of making irresponsible loans (often with predatory lending habits), then explain HOW your plan will lead to increased liquidity when Paulsen’s did not.
- All institutions taking government (taxpayer) money should have to commit to community service: Force them to offer FREE credit counseling to the public, for instance. They should have to help people caught up in their mess to rebuild their credit with better money habits.
- Any people found to have acted illegally in causing this mess (such as through predatory lending–like many adjustable rate mortgages were pushed onto people with no understanding of the process) must be prosecuted to the fullest extent of the law.
- Urge congress to pass new “usury laws” regulating credit card rates. Prior to the Reagan 1980s, there were laws regulating how much interest could be charged–with 10% usually being the absolute max. That meant that credit cards were not as easy to obtain (which was a good thing in that it forced people to have to earn credit and learn to manage it wisely), but it also kept away teaser rates. Urge Congress to reinstate usury laws.
Others with real economic credentials may have advice on how to get the financial sector back on sound footing. And others may have better advice than I do on how to win the public’s confidence–which is a key factor in stabilizing the credit markets–ending the crisis of confidence. But I do think steps like these will help.
When the public sees bankers still arguing that “Greed is good” (as one Wall Street Journal editorial did in defending bonuses and unlimited CEO compensation and golden parachutes–earlier this very week) and taking OUR money straight to luxury resorts and expensive perks, the public feels like it was punked–hosed, ripped off! Some of that anger got directed at Mr. Geithner at his press conference on Tuesday. More of it is aimed at Wall Street itself.
Don’t believe me: Watch the reactions to today’s Congressional Testimony by the Banking CEOs. These guys are lucky that John and Jane public aren’t marching on Wall Street with torches and pitchforks!
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