According to theWall Street Journal, New York State Attorney General Andrew Cuomo and Massachusetts Representative Barney Frank are discussing how to link Wall Street pay to the long-term performance of the firms. Wait a minute! Why in the world would anyone in government have any control over what a private citizen receives in pay or bonuses? This sort of discussion is the reason many of the banks that took TARP money are planning to give it back very quickly and refusing to take any more! The government has no business setting salary or bonus rules--that's why banks and corporations have stockholders. They are set in place to scream if they see things getting out of hand. Just a note here, the 'greedy' people on Wall Street did not cause the financial collapse.
The economic meltdown actually began in 1977 with the Community Reinvestment Act signed by Jimmy Carter. The intentions were honorable, but the CRA required banks to invest in poor urban areas, regardless of whether or not the investments would be paid back. In 1995, Bill Clinton strengthened the CRA requiring banks to provide loans to poorer communities, also allowing community action groups (e.g. ACORN) to intervene at annual bank reviews. Attorney General Janet Reno made it clear that she would file lawsuits if the 'fair lending initiative' was not followed. This is the root of the problem. The banks were forced into making loans they knew were no good. The banks had to find a way to get rid of 'questionable' paper, so they mixed it in with 'good' paper and sold it. The investments into this paper were speculative but gave good returns for a while (ask Iceland). When this house of cards finally fell, it fell hard. The alarms put out by the Bush administration about Fannie Mae and Freddie Mac were ignored because the Congressmen on the committees handling these matters were up to their necks in sweetheart mortgages and other entanglements, so nothing was done. Meanwhile, there is a bumper sticker out that says, "Honk if I'm paying your mortgage!". This is not a funny situation--it's serious, but propping up people who made irresponsible choices will not solve the problem. We have forgotten the free market and we need to get back to it. We also need to remember the concept of charity--if there is anyone around us who needs a small helping hand at this moment--not a government hand--a personal hand, we need to be there with a bag of groceries or a word of encouragement.
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