CHANGE is in the air - "Change we can believe in" and "Change we need" from one side of the political divide and "Change is coming" from the other.
Here are some changes I'd like to see over the coming four years:
Executive SalariesI am not one to favor government limits on private sector salaries, but I am appalled by the millions earned by executives while the corporations they directed lost gobs of money. Even more eggregious are the "golden parachutes" some executives got when they were forced to leave their posts. We need to put some accountability into the executive suites and some lead into those "golden parachutes"!
If any of these executives acted illegally, such as falsifying acounts or knowingly releasing false information I hope they are sued by shareholders and prosecuted to the full extent of the law. However, most of them have excellent legal advisors and, while what they did was immoral, it was probably legal.
CHANGE ITEM #1: Any salary or bonus or "golden parachute" in excess of 40 times the lowest pay of any employee in the corporation shall be paid in STOCK OF THE COMPANY that cannot be sold for FIVE YEARS. That will prevent executives from profiting from flim-flams that yield quick returns but are losers in the long run.
Rating AgenciesI listened to the Congressional hearings on Standard & Poors, Moody's, and Fitch, the agencies that do some 90% of the ratings on financial instruments. One of them rated AIG as AA two days before it imploded!
It turns out these agencies are paid for their ratings by the very corporations that issue the financial instruments. The corporations shop around for the agency that will give them the best ratings and, naturally, the agencies adjust their rating formulas to gain the most business. How can we make the rating agencies more accountable without imposing some unwieldy bureaucracy on them?
CHANGE ITEM #2: Fifty percent of the fee to a rating agency for rating any financial instrument (stock, bond, derivative, etc.) shall be paid in the FINANCIAL INSTRUMENT THAT HAS BEEN RATED that cannot be sold for FIVE YEARS.
Home MortgagesIt used to be that the bank that accepted your home mortgage would hold it themselves. No more.
To encourage home ownership, Congress created Freddie Mac and Fannie Mae as quasi-government agencies to buy mortgages. Congress passed laws and government departments made rules that encouraged banks to give loans to people who had poor credit and employment histories.
That was good for the constituencies of both political parties: developers and the building materials industry loved it, as well as workers in the building trades and unions and the people who were enabled to buy homes beyond their creditworthiness. Freddie and Fannie executives made generous political contributions to both parties as did the building industry and unions and politicians got lots of votes from happy beneficiaries.
The banks had nothing to lose - they processed mortgages and sold them off to Freddie and Fannie and others. The more mortgages they processed the more money they made. If the mortgages paid off - great, if not, not to worry, the government would take the loss.
CHANGE ITEM #3: Require banks and other mortgage-issuing entities to retain at least 25% of the mortgages they issue on their books. That way, when a mortgage is not paid off the banks have their own skin in the game.
CHANGE ITEM #4: When the current financial crisis settles out, bust Fannie and Freddie up into a half dozen or a dozen separate private corporations and make it clear that they are to compete with each other in the marketplace and that, after a grace period of five years, they will no longer be regarded as quasi-government agencies.
Alternative Carbon-Neutral EnergyPrevious Blog entries cover the reasons. We must reduce our dependence on burning sequestered carbon (oil, gas, coal) and instead conserve energy and obtain a greater percentage from carbon-neutral nuclear and renewable sources such as wind, water, direct solar and biofuels. During the primaries, when Sen. McCain suggested temporary elimination of the federal gasoline tax (18 cents/gallon), and Sen. Clinton went along, I expressed
my agreement with Sen. Obama who wisely objected to the plan.
However, I went further, calling for a punitive "carbon tax", increasing yearly until our dependence on sequestered carbon is significantly reduced and conservation and alternate energy is allowed to grow and mature under the economic "umbrella" of increased costs for coal, oil and natural gas. Although I oppose excessive taxation, in this one case, it is important to do what is possible and practical to reduce global warming, and a "carbon tax" is a lot easier to implement and administer than directed subsidies to specific forms of alternative energy.
CHANGE ITEM #5: Impose a "carbon tax" of $1/gallon of gasoline (and proportionately on coal and natural gas) and increase it yearly by an additional $1/gallon until sequestered carbon usage is halved and carbon-neutral alternative energy usage doubles.
SUMMARYThe above items cut across party lines and gore everybody's goat about equally. None of them require significant increase in government or bureaucracy. All are easy to compute and hard to cheat on.
Of course, that is the problem! Politicians on both sides gain power by imposing complex laws that virtually require corporations and unions and other interest groups to continue giving political contributions to assure they are treated better than other interest groups.
The laws are administered and interpreted by government "civil servants" :^) who benefit from complexity and ambiguity to make themselves important and keep their jobs and expand the bureaucracy further.
Everyone argues for exceptions to the rules! "Oh, you've got to exempt milk as a taxible item because babies need milk to live! Who could deny that?" "Yes, and bread as well." "Well, ice cream is made from milk and jelly is put on bread, so exempt them too." ... "Right, and ketchup is made from a vegetable, so exempt it ..." (Technically, tomatoes are fruits and bananas are vegetables but why let a technicality interfere with the growth of government? :^)
We need more laws and rules that apply across the board and are easy to interpret and enforce and hard to avoid or exploit. We need government regulations that reduce the influence of well-connected industries and unions. Sadly, that kind of CHANGE goes against the interests of most influential people and politicians of all stripes.
Ira Glickstein
