Back in September, during the initial TARP debate, I was sitting on an interminable cross-country flight from San Francisco to my home in Atlanta. The flight I was on had seatback TV, and I spent an hour or two watching CNN, listening to one banking industry shill after another talk about how we needed this bailout immediately, lest the world come to an end, or something like that. After a couple of ours, I had had enough. I broke out my laptop, and typed out my thoughts on the subject. I never did anything with it, though.
With Senator McCaskill's proposal, however, I thought it might be a good time to post the thoughts I had back then about the conditions that SHOULD have been imposed on that money in the first place.
In 1980 while campaigning for the Presidency, Ronald Reagan, the patron saint of American conservatism, famously used the example of "welfare queens" as an example of government profligacy. But now, we are seeing corporate "welfare kings" asking, in one fell swoop, for an amount nearly equal to the total amount paid to individuals over the last sixty years, and the Republicans are lining up to give it to them, with no real strings attached. It’s rather shocking to see how fast the US Republican party has changed it’s tune on the subject of welfare – I mean, twenty eight years is truly astounding for a political 180 like this – from "welfare is bad" to "welfare is good" is a giant change. Of course, now that I think of it, maybe it wasn’t even quite that long – the S&L bailout of 1987 (remember Charles Keating? John McCain sure does) may have been the seed that was planted for this – we heard the same things back then "these organizations are too big to fail", "the American economy would be devastated by the failure of the S&Ls". In the end, the bankers got their welfare handout, with no strings attached, and here we are twenty-odd years later, and we’re dealing with the same thing all over again. My thinking is that we’re only seeing this because of the failure of the American taxpayers to demand long-term strings attached to the corporate welfare the banks are demanding.
Seriously. Do these people actually expect the working, taxpaying people of America to simply foot the bill for their bad decisionmaking and get nothing whatsoever in return? From listening to the industry mouthpieces on CNN this morning, I suspect that is the case. I, as a taxpaying American, who earns my income primarily through labor and not investment (meaning that I pay a much higher proportion of my income in taxes than the Gateses and Buffets of the world those who earn their income primarily through investment), think I should get something in return – or at least some guarantees that I’m not going to get hit up for yet more money in the near future. I want strings attached to this money.
First, I want to know that executive bonuses are BANNED. Not one dime. These people ran their organizations into the ground, they, quite frankly, haven’t earned SQUAT. If a bank takes my welfare money, they have to agree first, to suspend all executive pay raises and bonuses for a period of ten years or until the money is paid back, whichever comes first. Furthermore, there should be a total compensation cap – no welfare-accepting corporation will be allowed to pay any employee or contractor more than fifty times the total compensation of the lowest-paid employee of that organization, and no more than ten times the median of all employees.
Secondly, I want the welfare banks to stop this ridiculous mandatory binding arbitration nonsense. If they choose to go on the dole, they’re going to have to submit to public scrutiny of their actions, and that means the court system.
Third, credit issuers on welfare must stop trying to sneak in account terms changes. Notifications to customers for changes in things like interest rates, account fees, grace period changes – basically, anything that has the potential to cost that consumer more than before – should be communicated to customers at least ninety days in advance, in a letter that is written to no higher than a tenth-grade reading level, in type that is no smaller than 12 point. The old interest rate/fee/grace period and new interest rate/fee/grace period should be printed prominently on the page, in no smaller than 24 percent type.
Fourth "Universal default" should be banned for welfare banks.
Fifth – every organization accepting welfare must agree to operate on a nonprofit basis for the next thirty years, or until the taxpayers are paid back with interest compounding at the standard LIBOR interest rate. Any operating surplus would go back to the taxpayers. You can either have privatized profit or socialized loss, but NOT both.
Sixth – Welfare banks will have to agree as a condition of accepting a taxpayer bailout to increase their presence in areas that are currently underserved by traditional banks. A longstanding issue in this country is the fact that minimum account balance and credit-scoring standards make it difficult for many poorer Americans to have access to bank accounts. The effect of this is that people without bank accounts are forced to pay exorbitant rates to cash their already meager paychecks. Welfare banks must, as a condition of accepting taxpayer funds, present a plan to improve access to banking for the poorest Americans.
Seventh, banks currently use unaccountable systems such as "Checkfree" to determine whether a customer is likely to be a good risk or not. Information brokers such as Checkfree and their competitors have no regulation with regard to a customer’s rights to challenge information in their databases. Information providers to welfare banks must be open and challengeable – much in the way that the traditional credit reporting agencies are today.
There will be those reading this who will call this "socialism" or even communism. In reality, it is the former. In exchange for the socialization of the big banks’ risk, there needs to be some limitations placed on the way they earn income going forward. They want welfare handouts, they’ll get them, for the good of the country – but the people funding their spending need some assurances that first, the money is going to be spent responsibly, and second, that the taxpayers’ money isn’t going to be used to maximize private profits in the future. There has to be some tangible real benefit for the taxpayers here.