Wall Street

While watching video of the Wall Street protestors I was reminded of my Arab chat room discussions. Often times someone would suggest that the world would be better served if the United States would collapse. When hearing this I would point out that if the US economy went into a depression people around the world would suffer and the poor would suffer the most. There is an old adage that says when America sneezes the rest of the world gets a cold. I would make the point that bad times take a deeper toll on the poor than on the rich and if you want to help the poor around the world you don’t do it by bringing down the rich. The same thing is now happening on Wall Street. These people do not understand that if you hurt the rich you also hurt the poor only more so.
There are two inequities that I would like to see resolved. The first is CEO pay. I have no objection to the board of directors determining the pay of the CEO but I do object to cross membership of the boards. Mr. A in on the board of company B and Mr. B is on the board of company A and they are both CEO’s and they are giving each other a raise. This is a distortion of the free market system and must be changed. This is the reason that CEO salaries which 40 years ago were 30 times the average pay and today they are 500 times the average pay. Not only is a salary of 25 million ridiculous but when they company losses money and these people are replaced they leave with huge golden parachutes because the collusion starts when they are hired and given bonuses even if they are fired.
The second is the too big to fail concept. Dodd/Frank was supposed to take care of the too big to fail problem but it actually made it worse. It separated the banks into two groups, those with assets greater than 50 billion and those with less. The big banks, of which there are six, are now called systemically important entities which is a euphemism for too big to fail. Before Dodd/Frank these six banks had a value equal to 17% of GDP and after Dodd/Frank they grew to 64% of GDP. Too big became too too too big. These banks must be broken up quickly as the European bank crisis may soon spread here and we will once again have to bail out these monsters.
If these protestors were asking for changes in the above two areas I would join them but instead they are trying to throw the baby out with the bath water by trying to bring down the free market system.