The #OccupyWallStreet movement has been capturing more and more of my attention lately. My impression until very recently was that the group was a largely disorganized rag-tag band which stood no chance of affecting any sort of change because they had no unified goals or objectives. As my interest in the group has grown, I began thinking about possible goals that it might aim to achieve. After watching the above video tonight and being impressed with the articulate declaration put forward by the New York City General Assembly, I decided to post these goals for others to comment on. I don't think these goals are in any way exhaustive, certainly they leave most of the issues listed in the General Assembly statement unaddressed. But I think these four narrowly defined goals are attainable and would then open up the door to a host of other reforms which are impossible so long as the connection between Wall Street and Washington remains as tight-knit as it currently is. So I submit now a list of proposed demands that the #OccupyWallStreet movement can take as its mission:
- Immediate resignation of all executives who have received bonuses in excess of $100,000 while the economy was in a recession. Return of that money to the people via donations to charities that help the poor and the unemployed.
- Petition for politicians to categorically reject corporate donations to their campaigns. Vow to boycott political parties that accept corporate donations in excess of $100,000.
- Breaking up of multi-state financial corporations (whether banking or investing) into smaller, more manageable entities. Requirement that financial corporations sell off any non-financial sector subsidiaries and non-financial corporations sell off any financial sector subsidiaries.
- Ban on corporately funded lobbying groups or attorneys having access to public officials.
I, as always, would love to hear what others have to say about these ideas. Would they be effective? Would they serve any greater good? Where am I being shortsighted? What else needs to be on this list?
I will decline to comment on the list of complaints made by the actual group as it, on the whole, betrays the pesudo-informed ignorance and adolescent rage that I've come to expect from these type of protests.
ReplyDeleteAs for your four suggestions:
1) I don't think this would be legally viable or necessarily right. Certainly getting a fat bonus while the economy is struggling looks bad. However the truth of the matter is that most executive compensation is not an arbitrary affair. They are generally predetermined via legal contracts based on certain performance parameters. Consider also that while the economy on the whole was not doing so well, a number of firms, even through the recession, remained highly profitable. Should not those executives be compensated for hedging their businesses against systemic market failure? In general I agree that corporate compensation can often be out of sync with reality; there are CEOs who've netted millions while running their companies into the ground (I'm looking at you Apotheker). I don't see this as anything criminal however; some companies just have really dumb boards.
2)This might happen anyway, though not in the way you're thinking. The CEO of Starbucks recently started a petition type thing asking other CEOs to stop political donations until DC gets its head out of its rear. He had a good number sign on last I checked. However, on the subject of separating corporate and political interests, well, there's never going to be a real solution to that question. Notationally,
Money <=> Power
in any society. Also recall that there are campaign finance laws that limit corporate donations (far less than 100k if i recall), so it's really the lobbyists and revolving door stuff that causes problems anyway.
3)That's been discussed by economists to some degree (though framed slightly differently). So the idea is that some systemic risk can be avoided by having less concentrated capital (too big to fail can't happen if they're not big). In principle this can solve some problems, but it creates its own. Unfortunately almost all aspects of finance has some kind of economies of scale. Consider this example: Facebook wants to IPO. To do this you need people (usually IBs) to bring the product (stocks) to market and try to ensure that they start at a fair price. Except now you don't have any entity big enough to underwrite this kind of deal. No bank CEO is going to leverage itself 20 times over for a single IPO that may go south (remember Google's?). So what then, a coalition of banks? Well, a lot of big deals now already have multiple underwriters, so with smaller ones you have to have dozens of firms working together. The costs for that just aren't going to pan out. And the problems go on.
ReplyDeleteAnother consideration. What about brokerages? Now with the internet they kind of have to be interstate and of a certain size. And I don't know about you but I kind of like having interstate bank service (disclosure: BAC is my primary bank).
As far as the whole dividing financial and non-financial corps thing, I assume you're referring to the whole Glass-Steagall/Gramm-Leach-Bliley thing (separates investment and commercial banks). I honestly don't think this really matters in today's world. It didn't really contribute, IMO to the financial crash (maybe tangentially at best), and in today's current structure, where all the big investment banks are now bank holding companies, ie, fdic/fed regulated, a similar event can't really happen again (cause it was really a short term liquidity thing).
4) This I'd kind of be ok with, but only if we kill unions and solve the revolving door thing. One unfortunate fact though is that the only people with key enough insights in a number of industries to be regulators are the ones who've actually worked in that industry. Inherently there will be problems there. I guess we could bar ex-regulators/bureaucrats from working in the industry they dealt with if they leave the gov't for x years or something. That might solve a part of the problem.