Going From "We Are the 99%" to "We Are the 100%"

Last week, I penned my own take on the Occupy Wall Street movement. My thesis was simple: Humans are hardwired to detest inequity. What's a feasible way to empower change? Ensuring financial literacy for all.

Of course, a financially literate citizenry is only the first step. What, then, comes next? Let me offer one area for consideration.

We are no better or worse than previous generations
In talking about how we evolved as human beings -- to live in a tribal society -- I quipped: "When there's a drought, everyone -- from tribal leader to newborn -- must cut back on food. It's not that it would be cruel not to feed others in your tribe. It's that it would be suicidal."

Helping one another wasn't some warm and fuzzy concept we once had but have now lost.

Human beings weren't better people back then, nor are we worse people now. It's simply that for the vast majority of our history (as tribal people), our interdependence was crystal clear. The incentive to look out for others was powerful.

Though this incentive is still valid, all of us -- the 1-percenters and the 99-percenters -- are essentially blinded from it. The rich and the poor, metaphorically and geographically, live in different worlds. Our interdependence doesn't stare us in the face like it used to.

It wasn't until the latest financial crisis, when 99% of taxpayers helped bail out some of the richest 1%, that this dependence became so obvious.

Never underestimate the power of incentives
As Charlie Munger has often reminded us, "Never, ever think about something else when you should be thinking about the power of incentives." If people are serious about reforming the way Wall Street does business, incentives must be front and center on their list of priorities.

I'm going to posit something that a lot of people won't like: Many of the people who helped bring the financial system to the brink of disaster did so not because they were evil or incompetent, but because they were incentivized to do so.

Although it's understandable to seek vengeance on those who did act fraudulently, we could do ourselves a big favor by instead focusing our energy on changing the system that created this mess. Here are three areas where our incentives led the system astray, and where changes can be made.

Banks: incentivized to play risky games with your money
In 1999, with the repeal of the Glass-Steagall Act, the ground shifted underneath the feet of the banking industry. Before, commercial banks (think "Mom and Pop Savings Bank") accepted deposits and made relatively safe loans. Investment banks (think Goldman Sachs), on the other hand, were able to raise funds by issuing securities and were somewhat riskier. After 1999, the wall between the two came down.

What's happened to the banking landscape since? Take a look here to see how Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , Wells Fargo (NYSE: WFC  ) , and JPMorgan Chase (NYSE: JPM  ) came to be "too big to fail."

Don't believe this repeal was a big deal? Back in 2009, the Fool had a Sweet Sixteen bracket trying to figure out what caused the financial meltdown. The winners: those who repealed the Glass-Steagall Act.

Ratings agencies: incentivized to look the other way 
Why was anyone willing to buy toxic bundled mortgages in the first place, or insure them as AIG (NYSE: AIG  ) so fatefully did?

The answer lies with the credit ratings agencies, particularly McGraw-Hill's (NYSE: MHP  ) Standard & Poor's, and Moody's (NYSE: MCO  ) . Besides the fact that it's pretty clear these agencies oftentimes had no idea what they were rating as AAA investments, they were incentivized to give positive ratings.

Here's a simple example: The "Bank of Bad Loans" (BOB) might bring Moody's a bundle of mortgages to be rated. BOB wants to sell the bundle -- it knows the loans are bad. But BOB can't do so until it can convince a buyer -- the "Bank of Awful Decisions" (BAD) -- that they are quality mortgages. BOB needs its bundle to get a AAA rating.

Even if Moody's understands what it's rating, it is incentivized to give positive reviews. Moody's is paid by BOB, not BAD. Understandably, Moody's wants BOB's business to keep coming back so it can continue rating these bundles.

Investors: not enough incentive to be long term
Finally, I'll step into a more precarious realm. I believe that if investors (individual and institutional) were more incentivized to pick stocks for the long, long haul, capital would be more efficiently allocated.

It's true that our capital gains tax system is designed to incentivize investing for at least a year before selling. Here's how a gain of $10,000 from a sale of stock currently looks (assuming the maximum 35% tax bracket).

Holding Period

Tax Rate

Tax Paid

Profit Left

< 1 year 35% $3,500 $6,500
> 1 year 15% $1,500 $8,500

That's certainly a big difference, and you'd think it would motivate long-term investments, but it simply isn't enough. Consider what fellow Fool Ilan Moscovitz dug up: Back in 1960, the average holding period for a stock traded on the New York Stock Exchange was 100 months. But by 2007 the average holding period was just nine months! What if our capital gains taxes looked like this, using the same example as above?

Holding Period

Tax Rate

Tax Paid

Profit Left

> 1 day 80%  $8,000  $2,000
> 1 week 60%  $6,000  $4,000
> 1 month 40%  $4,000  $6,000
> 6 months 30%  $3,000  $7,000
> 1 year 20%  $2,000  $8,000
> 2 years 15%  $1,500  $8,500
> 5 years 10%  $1,000  $9,000
> 10 years 5%  $500  $9,500

A starting point, not an ending one
Am I certain that these are the solutions we're looking for? Have I played out every conceivable consequence of these suggestions? Absolutely not.

Instead, I offer up these three ideas as a starting place. Clearly, people are angry. A lot of anger is directed at a vague group of people. While that anger is understandable, I don't think it will improve things unless we take a long hard look at our incentive systems.

Over the long haul, and a large enough sample size, we all function based on those incentives.

Fool contributor Brian Stoffel does not own shares in any of the companies mentioned. You can follow him on Twitter at @TMFStoffel.

The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Motley Fool newsletter services have recommended buying shares of Moody's, and writing puts in Moody's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 19, 2011, at 4:31 PM, satwa wrote:

    Just glanced over Brian's article and I was glad to see that others are thinking about progressive marginal tax rates. Whatever way you look at it income tax is the most effective, efficient and ethical tax there is. One thing I would like to see people in the know talk about is the role of technology in the market volatility and how best to regulate it. The other day Chimera Investment traded 59 Million shares..... this is nuts, that was more than HP.

  • Report this Comment On October 19, 2011, at 4:38 PM, EGTalbot wrote:

    Bring back Glass-Steagall? Well sure, it's a good idea. Adjust the capgain rates in some manner like you suggested? Quibbling over details aside, it has some merit.

    But there's a reason why our laws are the way they are. Because the money that funds our politicians wants it that way. I'm not suggesting there is some monolithic organization, but political contributions come primarily from various sources of big money that want to keep as much as they can (after all, most of us do).

    I could give you a dozen good suggestions for how to fix things, some of which would even garner support among most Fools. But few of them would be likely to pass.

    If someone could come up with a realistic way to do something about that - I certainly can't, short of armed insurrection - it would be an interesting discussion. Most of the other good ideas like some of what you've outlined here are essentially deck chairs to be rearranged on the Titanic.

  • Report this Comment On October 19, 2011, at 4:46 PM, anuragupta wrote:

    If security (defense + homeland) spending is brought down from $1Tr to $0.1Tr, its impact would be equivalent to raising all taxed by 40%.

    Anurag

  • Report this Comment On October 19, 2011, at 4:46 PM, TMFCheesehead wrote:

    @EGTalbot-

    Even though they might not have the greatest chance of being enacted, what are some of the ideas? I'd (seriously) love to hear them.

    Brian Stoffel

  • Report this Comment On October 19, 2011, at 4:48 PM, TMFCheesehead wrote:

    @anuragupta-

    Fair. I remember the WaPo had a site not too long ago that allowed you to play with different levels of funding for different groups. I had no idea defense spending was so huge! Whether that budget should be cut or not, I don't think many people realize just how big it is.

    Brian Stoffel

  • Report this Comment On October 19, 2011, at 5:11 PM, sheldonross wrote:

    Yeah it's so huge it's smaller then medicare, and smaller than social security.

    I'm no fan of throwing money away on foreign wars or ridiculous military spending but entitlement programs constitute twice the spending defense does.

    All this talk about historic tax rates, how about we cut back entitlements to historic levels.

    "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money. "

  • Report this Comment On October 19, 2011, at 5:12 PM, sheldonross wrote:
  • Report this Comment On October 19, 2011, at 5:24 PM, TMFCheesehead wrote:

    @sheldonross-

    Also fair. Though I have to say, I was pretty aware of how big SS and Medicare were before the recent crisis. I'm curious, any suggestions to make on how we could use incentives (or NOT use them) to give us a healthier budget?

    Brian Stoffel

  • Report this Comment On October 19, 2011, at 5:38 PM, anuragupta wrote:

    it is fashionable to treat entitlement spending as something free money to people. People have earned a vast proportion of this money by contribution to Social security and medicare taxes over their life times. Moreover all of this money enters the market via near total spending.

    The social safety net thus provided separated the developed world from the undeveloped world. Those who oppose it should visit Africa and India and see what happens with a zero social safety net.

    Finally, I find it amusing that some people would vote to eliminate entitlement spending while others would vote to raise taxes but no one would question the humongous security budget.

    US internal debt is ~$14Tr. The cost of Osama hunt has been at least $3.3Tr so far.(http://www.thedailybeast.com/newsweek/2011/09/04/data-beast-...

    To fool the common public, the govt has divided the security spending into multiple buckets. Here the projected 2012 spending: $1 - $1.4 Tr + classified spending. This is more than 50% of the total tax revenue collected by the US govt.

    http://en.wikipedia.org/wiki/Military_budget_of_the_United_S...

    Keep attacking the entitlement spending that provides the basic quality of American life at a cost that is mostly paid off by the recipients. But instead keep splurging on global power projection. History has show how empires have been bankrupted by military expenditure. The latest example being the Soviet union.

    Anurag

  • Report this Comment On October 19, 2011, at 6:03 PM, CaptainWidget wrote:

    Your idea that capital would be more efficiently allocated in the long haul is 100% categorically wrong. I'm honestly curious...did you just pull that one out of thin air?

    When the market changes, the capital structure needs to change. Otherwise it's sub-optimally allocated....so....unless you think that market only changes once every 10 years, you're incentivizing mis-allocation.

    The market is extremely dynamic, wants and needs change on a DAILY basis. Putting more barriers between new great ideas and the money to fund them is ridiculous.

    Sorry, you get an F in economics

  • Report this Comment On October 19, 2011, at 6:54 PM, EGTalbot wrote:

    @brian -

    trying to draw me out, huh?Ok, here are two

    1. Putting back the strong part of Dodd-Franks that regulated derivatives in a meaningful way.

    2.Get rid of the hedge fund tax loophole(s).

    I mention both of these because they are both ideas that have wide public support and would have directly contributed to stabilizing the system in the case of #1 and reducing the deficit in #2. And both were on the table in congress and got pulled due to pressure from those who fund the politicians.

    These are just two ideas and surely we could do other things instead that would also work. But it's easy to talk about these things - it's not so easy to come up with solutions to the root problems. I will grant that there are some legitimate philosophical differences among Americans abut things like taxation and entitlements. But I really don't think that is anywhere near the biggest problem.

  • Report this Comment On October 19, 2011, at 7:14 PM, bendonian wrote:

    @TMFCheesehead -

    How to use incentives for a healthier budget? You'd have to start with the people who set the budget, the politicians. I don't know enough about campaign contribution laws, so I can't weigh in on that. But we could make their pay, benefits, etc dependent on coming up with a balanced budget.

    So for example in 2010 we took in roughly $2.2 trillion in tax revenue but spent roughly $3.5 trillion for a deficit of 1.3 trillion. Since we overspent by 60% (1.3/2.2), the lawmakers responsible for making the budget should lose 60% of their paychecks.

    The big problem is what would "incentivise" these very lawmakers to create this new system? Unfortunately, I can't think of anything.

  • Report this Comment On October 19, 2011, at 7:21 PM, TMFCheesehead wrote:

    @Captain-

    I'll admit, you have a good point, but here's my problem with what you're saying:

    Theoretically it makes sense to me, but in practice it just doesn't. When you've got people pouring money into IPOs the day they come out, only to see them fall 50% over the coming months; when you've got computer programs set up to do high frequency trading; and when you've got legions of "momentum" investors out there who aren't really looking at the fundamentals, it just doesn't jive with me.

    Also, does this mean that back in the 1960's, when the average holding period was over 8 years (8 YEARS!), the market was sub-optimally allocating capital? Then perfect optimization would be a holding period of....1 minute?

    Don't get me wrong, I get what you're saying, and I think it deserves attention, but I just don't think it fits with the reality of the situation.

    @EGTalbot-

    Thank you SO MUCH for sharing your ideas. I'd love it if we got some more down here!

    Brian Stoffel

  • Report this Comment On October 19, 2011, at 7:23 PM, TMFCheesehead wrote:

    @bendonian-

    What about strict term limits? Not saying that's a perfect solution, but it's a thought. Can't become indebted to a contributor over time if you're only in office for a few years.

    Brian Stoffel

  • Report this Comment On October 19, 2011, at 7:34 PM, bendonian wrote:

    Brian - I agree that term limits would help. Not only would it break ties to past contributors, but getting some new people into the conversation would hopefully bring new ideas as well.

  • Report this Comment On October 19, 2011, at 7:48 PM, TMFBiggles wrote:

    They have strict term limits in the California legislature. From my understanding, it's been anything but helpful.

    Here's a study on the issue:

    http://www.ppic.org/content/pubs/rb/RB_1104BCRB.pdf

    You might also want to search for Rich Smith's articles about Congressional insider trading, just for a loosely related tangent into other problems with the financial system.

    - Alex Planes

  • Report this Comment On October 19, 2011, at 8:04 PM, neamakri wrote:

    Brian has stated his arguments well. He did miss Liar Loans, which I blame at the top of the list.

    Second for me is the repeal of Glass-Steagall. Proverbs 22:28...Do not move an ancient boundary stone set up by your forefathers. So, the bible proverbs are wiser than our congress.

    ----

    Okay, here is an idea with merit. I propose that the Federal Gov. institute a 1% VAT on everything. This will especially apply to real estate sales and stock sales.

    I believe this will accomplish stability in the stock market without changing capital gains taxes. I personally can pay an extra 1% to purchase a good company stock. Wall street will stop screwing up the market as badly. People will buy stock because it is worth it, instead of using NYSE as an uber-casino.

    There would be two exceptions to paying VAT. (1) the usual exception for government bonds, (2) valid churches get the usual break EXCEPT they pay on stocks; that is a non-religious purchase.

    ----

    Any thoughts?

  • Report this Comment On October 19, 2011, at 8:29 PM, stan8331 wrote:

    Excellent article. Incentives are precisely what we have to pay attention to if we want to lessen the incidence of harmful behaviors. Definitely agree about the repeal of Glass-Steagall giving the banks the wrong incentives, and about the billing system corrupting the decision-making of the ratings agencies.

    I've been thinking for some time that we really do need to change the capital gains tax structure. I'm not sure it would be politically viable to go to the rate extremes you have on the short and long ends, but we absolutely do need to offer some sort of incentive for holding periods of multiple years. We don't want to overdo the rate incentives, or you could end up encouraging a different unwise allocation of capital. I think a one year rate in the range of 18% combined with a two year rate of 15% and a five year rate of around 12% might be the hot ticket.

    We do also need to provide some sort of disincentive for short term trading, I'm not sure whether an elevated tax bracket would be the right choice or something like a modest per-trade fee, say 0.02% per transaction, might do the job.

    Of course the current political environment makes it nearly impossible to enact any changes that actually make sense, but it's guaranteed nothing will happen if rational, nonpartisan discussion of the issues never takes place.

  • Report this Comment On October 19, 2011, at 8:41 PM, TMFCheesehead wrote:

    @Alex-

    I took a look, very interesting.

    @stan-

    Like I said, just offering a starting place, and looking for much wiser participants, like yourself, to come and make it more sensible.

    Brian Stoffel

  • Report this Comment On October 19, 2011, at 8:44 PM, hbofbyu wrote:

    A VAT tax by its very existence creates an expense on every single item and every business without any value being added to the final product. This is a drag on productivity with the cost pushed onto the consumer and likely is a regressive tax. It also penalizes labor intensive businesses without hardly touching banks and financial firms.

    Where did I read that if a pint of milk increased in price at the same rate that health care has since 1980 it would now cost $85?

    You've got to reduce Medicaid and Medicare costs. That's where the most waste and fraud are. Not in Social Security and not (as much) in the defense spending.

    My suggestion? Don't allow businesses to deduct health care premiums they pay for their employees. Detach health insurance from company benefits. Make everyone repsonsible for their own insurance - like car insurance. Nobody cares about price when they are spending someone elses money.

  • Report this Comment On October 19, 2011, at 8:58 PM, CaptainWidget wrote:

    <<Don't get me wrong, I get what you're saying, and I think it deserves attention, but I just don't think it fits with the reality of the situation>>

    The idea of liquid markets is for information to be immediately (or as immediately as possible) be reflected by the price of the commodity.

    If I work for a company, and I learn from upper-management that our production is going to drop in half while our costs are quadrupling, I have information that the market would want. By selling my shares of the company, I'm signaling to the market the I suspect my capital is not being efficiently allocated by owning that company. Selling is a GOOD thing for the market.

    Under your plan, I would be disincentivzed to send that signal (my very accurate, correct signal) to the market. So now I have to weigh whether the tax penalty, or the misallocation penalty, would be the greater pain motivator. I may decide not to tell the market about the future misallocation in an effort to reduce my own tax burden.

    Even the much maligned computer trader adds value to the market. Why? Because he's putting his money where his mouth is. He thinks that his computer program can predict the future movement of the stock better than your computer can. If he's right, GOOD! He should deserve everything he gets for correctly predicting the future. And he adds that value back into the market for helping adjust price signals and correctly allocating assets.

    And what if he's wrong. GOOD!!!! He loses his own money. If he bets, and he's wrong, then the market's lost nothing. He put in bad information that was over-ridden by the good, he loses, and his bad information goes out of business, while someone else's correct information stays within the price of the commodity.

    Liquid markets are essential to correct allocation of capital. If you're right, and you send your money to the right places, you bank. If you're wrong, and you go out of business, you go bankrupt and stop sending bad signals. If the government gets involved, the new incentive will be to only move money around at the speed the government deems appropriate.

    In reality capital gains shouldn't be taxed at all, but IF it is, it should be taxed at the same flat rate every other form of earnings is taxed. Then the disincentive for everything is equal, and people will just resume their behaviors as if no disincentive is in place (making the market distorted...but at least distorted equally)

  • Report this Comment On October 19, 2011, at 9:15 PM, neamakri wrote:

    A VAT of 1% will likely not cause the havoc you describe. It would stabilize the stock market. Also, I forgot to add that every dollar that leaves the country should pay 1% tax. For example, if Walmart sends a hundred million $ to China, then they can also send one million $ to the treasury. If someone sends $100 money order to Mexico, they can add another dollar to the Treasury.

    Medical costs; need tort reform. Juries award millions and millions. Set a reasonable limit. Then malpractice insurance can be reasonable For example, I talked to a surgeon who was contemplating joining the Army because he could no longer afford the insurance...and a soldier can't sue.

  • Report this Comment On October 19, 2011, at 9:16 PM, outoffocus wrote:

    People would also be incentivized to hold on to stocks longer if the majority of the return lied in the income of the security, rather than the capital gains.

  • Report this Comment On October 20, 2011, at 12:27 AM, Cubbob wrote:

    Why should I be penalized for investing money I have already been taxed on?

    We already have a progressive tax system in place and it is failing miserably. We need the Fair Tax enacted and then this would end loopholes and get everyone on fairer ground overall. Of course spending must be cut. Let's start with eliminating all funds to the United Nations and all other countries that hate us like Pakistan. Let's use those funds to help the US create jobs.

  • Report this Comment On October 20, 2011, at 12:29 AM, sliderw wrote:

    I like the idea of a progressive capital gains tax based on holding period, but it should start at around 80% and end at just below marginal income tax rate, to be fair.

  • Report this Comment On October 20, 2011, at 1:23 AM, rdub76 wrote:

    You can tax whoever you want at whatever rate you want. As long as there are corporate lobbyists in the capitol there will never be a truly free market.

    If companies were left to their own devices they would still implode from time to time, but if we didn't have government and quasi-government agencies (fannie and freddie) incentivizing the making of bad loans I don't think it would have been as bad.

    The one thing that would have almost singly prevented this whole fiasco is for consumers to educate themselves. Read a loan contract and understand it. If you don't get someone to help you understand it. The words adjustable rate and mortgage should never be anything other than an evacuation alarm. If you make $30,000/yr YOU CANNOT AFFORD A $500,000 HOME!!!

  • Report this Comment On October 20, 2011, at 1:37 AM, sliderw wrote:

    Regarding banks, are you implicitly suggesting that we should repeal Glass-Steagall? I'm not sure if that's your suggestion.

    Regarding ratings agencies, what are you suggesting? I can't tell what's your suggestion at all.

  • Report this Comment On October 20, 2011, at 2:30 AM, rdub76 wrote:

    What I am suggesting is taking government out of business. Completely. How many banks would give sub-prime loans if they weren't so easily sold to fannie or freddie because some politician thinks every average Joe should have a McMansion?

    As far as the ratings agencies I guess I am suggesting they would have to act scrupulously. I understand the premise of them getting paid by the banks looking for good ratings for their products. It's definitely a conflict of interest. Maybe more investors should do their own due diligence and not depend so heavily on a ratings agencies.

  • Report this Comment On October 20, 2011, at 2:34 AM, rdub76 wrote:

    No more bailouts for anyone. Government interference has led to the greatest recessions of all time. I'm no federal reserve expert but their setting of interest rates and flooding the market with money and giving cheap loans to favored institutions definitely distorts the market and is what really suffocates business.

  • Report this Comment On October 20, 2011, at 9:37 AM, Merton123 wrote:

    Herman Cain 999 economic plan is the simplist way to reform the economic system and was endorsed in OP ED in Oct 19 Wall Street Journal by Mr Laffer who came up with the Laffer Curve - the optimal tax rate which will bring in the most tax revenues.

  • Report this Comment On October 20, 2011, at 11:05 AM, Cubbob wrote:

    More government control of my investments is not needed. Why not tax everyone the same? Why penalize someone with smaller amounts to invest who move their money to prevent losses? Your recommendations of progressive taxes continue to favor the rich and the Warren Buffets of the world. We already have a progressive tax that favors wealthy people who can buy stock and hold for years. If you want to do something constructive eliminate shorting and betting that companies and world currencies will fail.

  • Report this Comment On October 20, 2011, at 11:35 AM, TMFCheesehead wrote:

    Everyone-

    I really appreciate the comments and thoughts offered, as they are diverse both in scope and in terms of the political spectrum.

    One thing I'd ask: because almost all comments are focused on the last proposal I posited, does that mean you generally agree with the first two, as well as the overall theme that incentives, not "pure evil" are to blame for the situation we've found ourselves in...

    ...or is it just that the last suggestion (about Cap Gains) is so contentious that it's what warrants comments the most?

    Just curious.

    Brian Stoffel

  • Report this Comment On October 20, 2011, at 12:34 PM, anuragupta wrote:

    I feel there should be no taxes on dividends or capital gains as those gains are generally made on the back of taxed capital. I don't like my taxed dollar to be taxed continually. If anything I deserve reduced taxes on other income just for taking the risk of injecting capital into economy that creates jobs and sources of tax income for the govt.

    Anurag

  • Report this Comment On October 20, 2011, at 4:37 PM, CaptainWidget wrote:

    <<...or is it just that the last suggestion (about Cap Gains) is so contentious that it's what warrants comments the most?>>

    This. Limited time, energy, and finger strength. Shoot for center mass.

  • Report this Comment On October 21, 2011, at 1:31 PM, Harley117 wrote:

    Here are the real reasons for the financial melt down and Glass - Steagall did not have anything to do with it. First and primary was the real estate asset bubble caused by the Fed policy of prolonged easy money. Without the dramatic drop in real estate values there would not have been a problem. Second, was the promotion of subprime loans. Fannie and Freddie set the standard for this encourgaged by politicians. Once real estate values begin to decline and borrows begin to get in trouble and default mark to market accounting required the banks to write down even performing mortgages which accelerated the drop in banks capital ratio. Now add to that the SEC changed the rules for short selling allowing hedged funds and others to short sell and pile on the banks which again reduced the capital. Furthermore, the SEC changed the capital ratio requirement for the 5 investment banks allowing them to leverage to about 30 to 1.

    This was a perfect storm but having Glass-Steagall would not have changed a thing. Now trading in derivatives is a total separate issue.

  • Report this Comment On October 22, 2011, at 9:21 PM, MKArch wrote:

    Brian,

    IMO culprit number one is the investors. The banks don't make stupid loans without stupid investors who couldn't get enough of the stupid loans. I would love to see someone start shining a light on them now that they are trying to pawn off their stupidity on the banks and ask the simple question "How could you possibly spend billions of dollars and not know what you were buying?". Not that anyone is interested in my common sense financial reform but make me king for a day and the ratings agencies are gone and investors capable of multi billion dollar investments are required to hire staff capable of evaluating what they are buying.

  • Report this Comment On October 23, 2011, at 6:22 AM, valespa wrote:

    Bribes, conflicts of interests, and not doing your job are illegal !!!

    IMO culprit number one is Godless people whom God (not terrorists!) will finish soon if they do not repent and return the money!

    Read the psalms often!

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