How to make Wall Street work better. Better for you, that is!

Even if it's a little too much of "inside baseball" for you, you should still be interested.

Everyone was affected by the Wall Street fiasco of 2008 and 2009--and many are still paying the price of near-financial collapse--some friends and family got down-sized, sons and daughters can't find work, cut-backs have dampen business for many small businesses--if you have investments, your portfolio is still in the process of making a recovery to break-even with where it once was.

I read an article in the current issue of Fortune, "How to really fix Wall Street," by Allan Sloan.  A good Cliff-notes-version goes something like this:

1.  Decrease the leveraging of taking out a loan--in effect make borrowing real by forcing recipients to put some of their own assets on the line to qualify.  The game should change to make borrowing require you to put up something more to lose than just the loan or asset you wanted in the first place.

2.  Make the fear factor real for highly compensated execs.  Before any governmental agency gives help to a financial institution using government monies, highly paid managers of that firm ought to be subject to an up to five years loss worth of bonuses and compensation; if this was done execs would think twice before looking the other way...or not caring what's being done in the name of the firm in the first place.  

3.  Make bankruptcy count again.  If a financial institution engages in risky or untoward actions that leads to substantial losses, the company should be--not saved by a bailout--but, instead, liquified and go out of business--and that includes the wealth of stockholders.  

4.  Require posting of collateral for derivative trades.  If you make risky deal--have the money that guarantees your side of the deal be put in escrow, just in case it goes bad.  If it doesn't go bad, little is lost in the process.

5.  Create a database that shows the on-going performance of borrowers' repayment for mortgages backed by mortgage-based securities.  That way everyone know what they've got--they have a good idea of the value of the security in real time.  

6.  Make credit agencies work on a competitive, free-market basis, then let the performance of each--with respect to quality of call, speed, and track records--break up what today amounts to a credit-rating oligopoly, an oligopoly that works very poorly indeed.  

If your eyes glaze-over with all of this talk, I understand but that's too bad.  You'll have a chance to influence the elective process--and then the legislative process--that's going to have to deal with these issues.  I realize that this amounts to something you'd prefer to leave to others to handle, but that's a mistake.  When you leave the financial process to others you, in effect, have decided to let others play with your economic well-being and security.  Does that get your attention?  Remember, you're in the game whether you want to be or not.  
_______________________________________________________________

To make sure you get a "tweet" with every new blog, follow "keithmurrayblog" on Twitter!  Think others might like to read this?  Re-TWEET it to your followers with the SHARE ARTICLE tab below!