My Soapbox Advice to the OWS Movement and then some

I may not know much, but I know a lot of it. So I decided to share my opinions and thoughts on what I would do if the OWS movement either elected me Grand Poobah or asked for my advice:

1. The Great Lie of Wall Street.

Every CEO tells the same great white lie. It is at the heart of every communication. It is at the heart of every financial decision. It is, at it’s very base, the reason why you all are in the 99pct and they are in the 1pct. The Lie ?

Great CEO  White Lie = “We are acting in the best interests of shareholders.”

When a CEO utters this lie, everyone automatically forgives whatever they do. Add 10k jobless to the unemployment rolls ? Sorry, we did it in the BEST INTEREST OF SHAREHOLDERS.  Merge or buy a company and cut back across the board ? We did it in the Best Interest of Shareholders.

The problem is that unless the company is losing money and it is the only way to keep the company alive, in this era of 9.1pct unemployment  it NEVER is in the BEST INTEREST OF SHAREHOLDERS.

Shareholders , whether they own shares directly or through mutual funds or pensions do not live in a corporate vacuum.  Their lives are impacted by far more than the share price of a stock. Every layoff in the name of more earnings per share puts a stress on the economy, on the federal, state and local governments which is in turn paid for through taxes or assumption of government debt by….wait for it.. the same shareholders CEOs say they want to benefit.

If OWS really wants to change corporate structure and impact the economy, talk to shareholders. Talk to your parents, uncles/aunts, cousins, friends who own shares of stocks either directly or indirectly and have them state loudly and clearly that they would rather have a higher Price to Earnings Ratio and even a lower stock price than have their TAXES increase in order to support all the people laid off from their jobs in the name of shareholders !  

You might even consider buying a share of stock. Just 1. Maybe you can all pitch in and then go to a shareholders meeting and let them know how you feel about the best interests of shareholders.

2.  Push to Make All Financial Institutions Partnerships

We should make all investment banks become reporting partnerships (meaning they still have the same reporting requirements they have today ). I would have no problem with our government loaning money to the partners of Goldman Sachs and Morgan Stanley and other Too Big To Fail Institutions so that they can buy back all public shares of their stock. Of course all those  partners would become personally liable for repaying that money back to the government.  It would probably be about 120B dollars in total to take these 2 companies private. That is far, far less than a possible bailout would cost.

Those personal guarantees would change EVERYTHING in the banking industry. It would change the decision making process across the board.   There would be a moral hazard to every decision. Today , a wrong decision and they vacation on their yacht. As a partner,  the wrong decision and they are protesting right next to the OWS crowd as a 99pct er.  It would be the definition of having “skin in the game”

3.  Limit the Size of Student Loans to $2,000 per year

Crazy ? Maybe, maybe not.  What happened to the price of homes when the mortgage loan bubble popped ? They plummeted. If the size of student loans are capped at a low level, you know what will happen to the price of going to a college or  university ? It will plummet.  Colleges and universities will have to completely rethink what they are, what purpose they serve and who their customers will be. Will some go out of business ? Absolutely. That is real world. Will the quality of education suffer ? Given that TAs will still work for cheap, I doubt it.

Now some might argue that limiting student loans will limit the ability of lower income students to go to better schools. I say nonsense on two fronts. The only thing that allowing students to graduate with 50k , 80k or even more debt  does is assure they will stay low income for a long, long time after they graduate ! The 2nd improvement will be that smart students will find the schools that adapt to the new rules and offer the best education they can afford. Just as they do now, but without loading up on debt.

The beauty of capitalism is that people like me will figure out new and better ways to create and operate for profit universities that educate as well or better as today’s state institutions, AND I have no doubt that the state colleges and universities will figure out how to adapt to the new world of limited student loans as well.

Finally, the impact on the overall economy will be ENORMOUS. There is more student loan debt than credit card debt outstanding today. By relieving this burden at graduation, students will be able to participate in the economy

4.  Tax the Hell Out of Wall Street; Give it to Main Street

In a world of High Frequency Trading and black box trading that does nothing but create a platform for “financial hackers” to turn the market into their own proprietary financial playground, we need to figure out a way to revert the Stock and Bond Markets, and the derivative instruments created from these equities, back to their original purpose, a place to raise capital for growing business. Instead, today its a platform for financial engineers and hackers looking to exploit every and any opportunity.  When 60pct or more of trades are from High Frequency/Algorithmic traders and the correlation for every market index rushes past .7, the market is no longer a market, its a platform.

The simplest way to change this is to place a very simple per share tax on every transaction. 10 cents a trade. Every share. Every option. Every Bond. Every currency transaction.  Every trade.

The obvious response is that trading volume will plummet. So what ? Let it. The next response is that traders will merely move their trades to foreign exchanges. Yes they will. Will transaction costs go up ? Duh.. that is the point. The market thrived when spreads and transaction costs were much higher just a few short years ago. It will survive now.

You see, in the real business world there is always a trade off between risk, reward and the law of unintended consequences. If we have learned anything from the past 12 years it should be that black swan events happen more frequently than we like and that the law of unintended consequences has a far greater negative impact than business as usual has a positive impact. 

I would happily send transactions overseas and let them absorb all the risk that comes from a continuous effort of financial engineers and hacks trying to game the system.  By letting them move overseas, we would still have risk because of the interconnection of economies, but our direct risk would be much less. And given that the UK already has a semblance of a tax on transactions, it wouldnt’ take long before they would need to expand that tax in order to hedge the systemic risk associated with financial engineers and hacks.

More importantly, it might just put the market back to the basics of what the stock and bond markets are supposed to be, a means of raising capital to support corporate growth.  There used to be a time when Investment Bank Partnerships made their money scouting out small companies in need of capital and matching them with investors. They weren’t as big as they are now, but they managed to create quite a few growth industries. Something we could use some of today.  Making the stock market a launching pad for companies will have far greater value and impact employment far greater than making sure High Frequency Traders can get their trades in.

What does everyone out there think about these ideas ?

and just for shits and grins, here are some old posts on related matters

Fixing Executive Compensation

Apr 1st 2009 10:57AM

I have a simple question.  Why are profitable companies laying off people ?  I can see if a company’s survival is at stake.  If payroll can’t be met. If debt can’t be paid. Then layoffs are a necessary evil. Even if companies have created cash flow deficits through their own mistakes, that’s the nature of business. Mistakes are made.  What I have a problem with is that discussion of executive pay never includes whether or not the executive has been good enough to pre empt or prevent layoffs.

Executives are not stupid. Usually. They recognize that killing off employees can juice a stock price. Even in this market. Which in turn can juice the value of their options and compensation.  At the companies I run, we have cut raises, put a freeze on hiring, done what we need to do, but we have done all we can to avoid layoffs. Why ? Because its the right thing to do. Its the patriotic thing to do. I’m selfish enough and arrogant enough to think that maybe if I pay attention to the big picture that I can impact the big picture.

As a shareholder, where possible, I would prefer that the companies I own shares in do the same thing.

I own stock in some firms whose backs are up against the wall because of debt. Unfortunately, they don’t have a choice but to cut jobs in order to save jobs. I understand this reality. It’s unfortunate, but a fact of life.  I also own stock in firms that are profitable.  Put a freeze on hiring. Put a freeze on all raises to employees of all levels, including yours.  You don’t have to try to squeeze every nickel to the bottom line. I realize these are extrodinary times.  I’m happy to accept a P/E ratio that is 20pct or 50pct higher (lower earnings vs the current price) . I want you to manage for the long term benefit of the company rather than manage to the stock price.

I don’t have data, but  I’m willing to bet that private companies are far less likely to lay off people than public companies.

As the discussion on executive pay continues, my message is simple.  Give credit to those executives who bust their asses to avoid layoffs except in cases where its an absolute necessity. Pay ‘em a premium vs those who cut jobs in profitable companies.  Look to private companies as guides to what a well managed company can accomplish, and how executives are compensated.

Capitalism isn’t about having the biggest bottom line for the current quarter.  Capitalism is about individuals busting their asses to maximize value for shareholders.  Sometimes you have to look at the bigger picture in order to reap the biggest returns. Not all rewards are short term.

My 2 Cents on CEO Pay

Apr 15th 2008 2:09AM

There is a game played by CEOs with the corporate issuance of lottery tickets. Otherwise known as stock. Stock can be issued in any number of ways, shapes or forms. Warrants, options, restricted or unrestricted stock. No matter what you call it, every CEO hired, is asking for equity knowing that their only goal is to hit the jackpot and create a pool of wealth that puts them in the “fuck you” wealth category. Thats enough money to buy or rent just about anything you can think of and put you in position to never have to work again. You just live off the cash in the bank.

Put another way, every hired CEO is looking to be in a position to look in the mirror , smile and tell themselves they have made it. They are living the American dream. The only way to do that is to grab as much equity equivalents as you can and do everything you can to get that stock price up as high as you can while periodically liquidating the stock and stuffing the cash in your bank account.

There is absolutely nothing wrong with doing so. Any CEO who doesnt take advantage of this golden ticket opportunity is an idiot. In fact, although I don’t have actual numbers, I would hazard a guess that more than 95pct of CEOs hired to run companies with a billion dollar plus public market caps probably do get themselves to the position of having more than 10mm dollars in equity very quickly. While those who manage to hold on to their jobs a while and not screw up too bad, can relatively quickly get past the 25mm dollar in equity mark and reach the 50mm dollar mark with in 10 years. Its actually pretty tough to screw up and not get there if you have any brains at all.

Why ?

Because you have the entire Mutual Fund, Hedge Fun and Brokerage industry doing everything they can to get you there. Think about it.

You can’t turn on CNBC or Fox Business without them cheerleading the market to go up. Every man, woman, child, fund, index or interested party who buys the stock is doing everything they can to get the stock of the company to go higher. They don’t really care how you run the company and they care less about the results of the company than they do about the performance of the stock. Heck, even if they did care, shareholders dont really own anything and have zero say in the company. If you really dig into it, its the ultimate in social networking. Everyone who owns the stock belongs to the fan page or group for the stock and they are telling everyone they can how wonderful the company is and why the stock will go up, all while praying it does so.

Its the American way and it works ! Hundreds of millions of dollars are spent every year by brokerages telling every American that the stock market over time will go up 7pct per year. All you have to do is diversify and hold onto your stock long enough. For better or worse, everyone believes it.

With all of that social networking power, call it stocksourcing behind stocks, how can CEOs not get rich ?

The problem with all of this is that there is a huge disconnect between the CEO and shareholders doing well and those who work for the company doing well

Yes, its true, particularly in markets like we are experiencing now, stocks can hit 52 week, or even multi-year lows.(although more often than not, in spite of low stock prices, market caps have increased).

Yes, its true that CEOs see the value of their holdings shrink. However, unlike lottery tickets whose value goes to zero when you dont hit the number, the CEO equity positions retain their upside and history has shown us that if they go far enough underwater, they will get repriced and /or reissued. All in the name of keeping the CEO happy. So while CEOs may get “less rich” for awhile, the game is stacked so that a downturn gets them happy real fast when the upturn comes.

The disconnect is that there is a big difference between not making Wall Street happy and not making money.

The pressure from Wall Street is to grow earnings forever. Not matter what it takes. This isnt a problem when a company is doing well. EVeryone is happy. But when the economy hits a bump like it has now, when the market is hitting a bump and stock prices are declining, like it is now, the pressure comes. Everyone owning the stock reacts and whats to know what the CEO will do to get the price back up. This, as they say “is where the CEO earns their pay” Unfortunately, what this really means is that everyone who works for that company is at risk. At risk of losing their jobs, benefits, raises, you name it. Its at risk.

All of which is a long winded way of saying that employees live in the corporate cash zone, CEOs and the top few in management live in the equity/lottery ticket zone.

Those in the cash zone always take the first hit. People,places and things that consume cash are the first things to go because cash expenses immediately reduce earnings. If you or anyone like you consumes cash, unless someone upstairs thinks you generate a straight to the bottom line return on the cash expenditure, you are about to become a corporate ghost. Your person, place and thing will be memorialized as a cut to increase earnings mentioned in a press release that wall street will cheer and use to push up the stock price.

What makes me sad about all of this is that I really think that in this country if there truly was a connection between shareholders and management, that if given a choice by profitable companies, most of us would choose to hold on to our shares and accept an expanded PE for some period of time in exchange for people keeping their jobs.

I would love to receive an email from a company I own saying something to the effect of:

Dear Shareholder,
We are facing a very difficult decision that we would like your feedback on . Our earnings per share last quarter were 20 cents, and for the entire last year, 80 cents. Because of a downturn in business caused by XYZ factors, we face the choice of making 10 pct less, or cutting headcount and related expenses in order to maintain our earnings and possibly even grow our earnings a couple cents this year.

As a shareholder, we would like to ask you whether you would consider allowing us to retain these valued employees. We recognize that it would require you accepting a PE multiple 10 pct higher than the current market. We hope you would be willing to make this concession. We think that the jobs this will save will return far greater value to shareholders over the long run.

We look forward to your vote.

Personally, Im willing to give a higher multiple in exchange for saving people’s jobs. At least once.

Unfortunately, this of course is a fantasy that can’t happen in this country.

Which brings us back to CEO Pay.

As long as CEOs live in the equity/lottery ticket zone and employees in the cash zone, CEO pay is going to be outrageous relative to everyone else.

The only possible way to change this is to put CEOs in the cash zone. Make companies generate 100pct of their compensation in cash that is 100pct expensable in the quarter paid. Thats not to say they cant own stock. Hell yes they can own stock. But make them buy it either on the open market, or as part of the programs that make stock available to every company employee, on the same terms. They are getting paid enough in cash and if they believe in their ability to run the company, they can put their money where their mouth is. Eliminate all the free lottery tickets. Make them buy stock, options, warrants, whatever, on the same terms as everyone else can.

Shareholders tend to ignore how much stock is given to management, they don’t ignore cash. Companies will always be a lot more stringent with their cash, whether its paid to the CEO or anyone else. CEO cash compensation will go way up, but total compensation will come way down. More importantly , CEOs getting paid huge sums in
cash will stand out like a sore thumb when things arent going so well. They will be treated like everyone else in the cash zone and held far more accountable for their work.

Of course this is all just my opinion, but to me its a good thing for all involved. The rich can still get richer, but everyone shares in the risk.

116 thoughts on “My Soapbox Advice to the OWS Movement and then some

  1. Pingback: More On Occupy Wall Street and The Tea Party | Randy Thomas

  2. Hey Mark,

    Would you like a simple yet effective way to combine philanthropy, art and changing this country and the world for better? How to create new jobs, educate children and model to the world how money spent collectively from philanthropists, entrepreneurs and others can create not only better microcosmic conditions for some and macrocosmic waves for others? Here’s an answer.. NOT THE ANSWER BUT AN ANSWER! http://projectventurephilanthropy.com/

    Love,
    Bret

    Comment by bretawarshawsky -

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  5. FYI: THE NEW COMMON SENSE

    http://pastebin.com/gm2UV08D

    Comment by modelmotion -

  6. Mark, you seem to miss the point that much of #occupywallstreet is focussed on the reality that we now live in a corporatocracy. That needs to be fixed and is one of the goals of the movement.

    Any suggestions?

    Also, the problem with a “transaction tax is:

    1. it distorts the market and makes it less efficient
    2. it puts more money in the hands of the clowns in DC that have created much of this mess. Until they get their financial house in order and live within their means they should not be given one dime more. Further their ability to borrow more on our behalf should be stripped from them. Yes, this would create a bit of chaos, but these people have done serious damage and we simply cannot afford their irresponsible behavior any longer.

    Now I suspect that the real flaw might lie in some of the existing legislation that is distorting the financial markets. Rather than a tax, perhaps we need to take a closer look at the legal incentives that the government has created that probably lead directly to this type of behavior on Wall Street.

    That said, thanks for your ideas. They are insightful as always.

    ~ the 99% :):):)

    Comment by modelmotion -

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  10. Chabby.
    I said in my last comment that we,the commentators,should leave your blog because it is obvious that u want to show off & issue decrees,not to have dialogue…
    I decided to give u a 2nd chance….
    I read your article & your positions on
    …taxing the rich,
    limiting student loans to…$2000( why not…to 200 bucks,
    to buy a bicycle…) & I realised 2 things…

    1) U r not a serious person.
    &
    2) u r one more proof that “the rich ” are no good in politics…

    Maybe one kind of talent is needed to make money & another to be a succesful politician…
    I suggest u keep making money & avoid interference with politics because u already are a laughing matter…

    Comment by harrysmatical -

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  25. The Great CEO White Lie “We are acting in the best interests of shareholders.” Do you agree? Should student loans be limited to $2k as the author suggests? Should America “Tax the Hell Out of Wall Street; Give it to Main Street?” You can weigh in with your opinions here at Survcast regarding Blog Maverick’s post: http://bit.ly/r4wLWS

    Comment by maxrevz -

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  37. I agree with your overall thoughts, what i beleive you miss is that people have lost the concept of personal accountability. They all believe that there is going to be someone there to bail them out.

    Whether it is a student today with a helicopter mom or dad that will come to the rescuee, the overweight or obese person who believes that thier health is someone else’s responsibility.

    When did we lose this personal accountability, it began in the 60’s with the introduction of the “Great Society”. There were areas of social assistance that were needed; however they continued until today they are considered to be either entitlements or we lack anyone with the political will to say truthfully that it doesn’t work.

    Education – Before you start in on Student loans, lets first talk about the entire Education monopoly. Where can you mantain the same overall methodology of teaching for the past 50 years and have your success rate (graduation at High School) fall from 92% to 18%. There is a complete lack of accountability at the haed of a school district to the teachers, and parents must be held accountable for the lack of the childrens success as well…..

    Thanks for the post.

    Michael

    Comment by TanneryWealth -

    • I’d like to respectfully take issue with this whole idea of personal accountability, at least in the context of your post.

      First, it strikes me as a little misguided. I believe that it is the product of the mythical American value of individualism. The fact is nobody does it alone. The community, from providing the infrastructure and security to education and markets, makes “individualistic” successes possible. It works this way because we are human beings and are communal by nature. We have a collective responsibility to each other, so we pool our resources and set up governments to build roads, schools, and other structural needs, and hire police and firefighters to protect the community’s people and property.

      But our collective responsibilities do not end there (and this is where the Great Society comes in). The programs introduced under the Great Society finally gave recognition to this idea of collective responsibility and were instituted to deal with some pretty serious shortcomings of the individualism and personal accountability you seem to prefer. Ideally, those programs would no longer be needed, but as a society we still are still marginalizing certain groups of people.

      For instance, we still live under an economic system that accepts the practice of exploiting labor by paying sub-living wages—even to heads-of-households—and the idea that 4.5% unemployment is full employment—yeah, I know, these things help keep inflation in check and the cost of living down for the rest of us, but… There are still serious problems with racism and discrimination—thank God I’m not a Latino in the U.S. in this day and age. And then there’s health care…45 – 50 million uninsured (that’s roughly about the same number of people as the combined populations of the states of Texas and New York), many of which fall into one of the categories listed above. What do you propose to do with these people?

      I’m not so sure that the cultural issues that contributed to the problems the Great Society looked to correct are not still fundamentally a part of our culture; thus, the need for these kinds of programs still abound. I am not suggesting that they cannot be made more efficient, but this is different from eliminating them, which appears to be what you are suggesting. Please, correct me if I am wrong.

      This is not likely to be a popular opinion, but I believe that all of the members of a society have a collective responsibility to each other, especially those that are marginalized “for the greater good.”

      Comment by texaszag -

  38. Great post… except I take issue with the term ‘financial engineer’. Engineers spend their careers building stuff. These people don’t build anything.

    Comment by chuterri -

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  52. Mark,

    Take a look at the way student debt is being repackaged and used by ‘educational institutions’ in very similar ways to the derivative banking market that caused our last meltdown.

    http://boingboing.net/2011/10/07/122076.html

    “Meanwhile, universities have increased their fees to astronomical levels, far ahead of inflation, and lenders (including the universities themselves) offer easy credit to students as a means of paying these sums (for all the money they’re charging, universities are also slashing wages for their staff, mostly by sticking grad students and desperate “adjuncts” into positions that used to pay professorial wages; naturally, the austerity doesn’t extend to the CEO-class administrators, who draw CEO-grade pay).

    The loans are backed by the government, and constitute a special form of debt that can’t be discharged in bankruptcy, and that can be doubled, tripled, or increased tenfold through usury penalties for missed payments (the lenders themselves have a deplorable habit of applying these penalties even when payments are made, through “bureaucratic error” that is nearly impossible to correct).

    These debts are turned into securities, and represent the backbone of yet another subprime bubble in America, one that is due to explode soon, as more and more Americans find themselves drowning in student debt and faced with the prospect of having their wages garnished all the way through to social security.”

    ——————–

    The real solution is to have tuition be charged on a revshare basis from alumni. Have students sign binding contracts that allow the university to garnish their wages in year 5-10 of their career at a small percentage rate of 3-5% of their base salary.

    If that model were put into effect colleges would only accept students who they truly believe were likely to get a job after graduating and their revenue would be dependent on the actual income of those students in years 5-10 of their career.

    Students would have zero debt due while in school, zero debt due for 5 years after graduation and pay revshare only if they actually earn a salary in years 5-10. Schools would have incentive to reject unfit students, incentive to fail out students who show no promise or drag out their academic career and incentive to build robust post-graduate career placement infrastructure.

    Comment by stewarttongue -

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  60. With respect to student loans, how about re-writing the bankruptcy laws to allow student debt to be discharged. I bet you’ll see some much more conservative lending, and consequently some much lower tuition costs!

    Comment by neilkusens -

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  66. Occupy Wall Street has so far been successful in enlisting the support of a number of leftish celebrities, prominent unions, and young activists, and has received a lot of media coverage. The protestors have successfully stood their ground against Bloomberg’s attempt to evict them.

    But this victory can by no means considered final. Rather, it tasks us with the question: “Where do we go from here?”

    If this successful moment of resistance against the coercion of the State is to signal a turning-point for this movement, it must now address the more serious political problems that confront it. It is crucial that the participants in these demonstrations ask themselves where they stand in history, and more adequately conceptualize the problem of capitalist society.

    Though Occupy Wall Street and the Occupy [insert location here] in general still contains many problematic aspects, it nevertheless presents an opportunity for the Left to engage with some of the nascent anti-capitalist sentiment taking shape there. To this point, most of the protests have only expressed a sort of intuitive discontent with the status quo. In order to get a better sense of what they are up against, they must develop a more adequate understanding of the prevailing social order. Hopefully, the demonstrations will lead to a general radicalization of the participants’ politics, and a commitment to the longer-term project of social emancipation.

    To this end, I have written up a rather pointed Marxist analysis of the OWS movement so far that you might find interesting:

    “Reflections on Occupy Wall Street: What it Represents, Its Prospects, and Its Deficiencies

    Comment by Ross Wolfe -

  67. Somewhat of a naive statement, but why not setup your own exchange for companies to generate capitol from? You’re one of the few with the means to do it. Start from scratch and set it up in the simplest way that allows companies that want to produce to get capitol and pay dividends for it. And structure it to prevent all the gaming of the current system the looters attempt. Put some competition to the current exchange and let the free market do what it does best.

    Comment by cdustinbartlett -

  68. Here’s the response I posted on my Google+ thread about Mark’s first suggestion:

    Mark Cuban has come out with comments related to the Occupy Wall Street movement. My reactions to Cuban’s comments are below:

    Cuban’s first complaint generally is that CEOs are lying (and apparently only “Wall Street CEOs”) when they say they are laying off employees because that is in the best interests of shareholders. Let us generalize this complaint to all CEOs, not just Wall Street, and address it in that form since constraining it to Wall Street is silly. Cuban apparent thesis is as long as businesses are profitable and can retain these employees without going under that it is in the best interests of shareholders to retain these employees. Cuban has a point that the collateral impact of adding to unemployment can impact shareholders negatively. But I doubt Cuban has any empirical evidence to support his assertion that such negative impact more than offsets the direct capital benefit to shareholders of operating a business more efficiently. But if Cuban believes his thesis is correct (and of course apparently he does given he’s posted it) then it seems he should take his own advice to heart and have his own companies hire additional workers until he has a scintilla of profit because that’d be in his own best interest. Don’t hold your breath for that to happen.

    Comment by geeksingularity -

  69. Two disagreements from experience.

    Education. I have been an educator for 40 years. There is little wasted money in either public or private institutions. No really big salaries. And less and less benefits. When I went to school my tuition was $500 a term. Decades later that doesn’t buy a class.

    Education also needs to be improved at lower levels. Most college sophomores wouldn’t get out of a good high school four decades ago.

    Second regards buying shares to comment. As a Union member we used to do exactly this. Try to get recognized in a shareholders’ meeting if you aren’t a known force. It is next to impossible.

    Comment by hroeder -

  70. couple points:

    — the near-universal effort to cut labor costs by cutting wages and benefits and laying off millions of workers is very much against the best interest of shareholders; that’s because it’s also taking millions of potential american customers out of the market – which is a lesson henry ford well understood when he introduced the $5 a day wage.

    — if all financial entities become partnerships, doesn’t that mean that outside shareholders no longer have any voice in corporate governance?

    to put it another way, if the banks listen to one of your suggestions, than the other suggestion that #ows buy a share of stock will have just become moot.

    — it is entirely likely that the eurozone will also adopt a per-share tax, making the “transactions will move away!” argument far less powerful…unless somalia or some floating offshore platform set up a financial exchange.

    Comment by fakeconsultant -

  71. Love the blog. A few points to add:
    1. Student loans forgivable. Think about rewarding college grads for giving back, works especially if they are unemployed. Even better someone like me forgive part of my debt I invest that money (more on that in a minute).
    2. The concept of the stock market is not based on value of company. You correctly i.d.the hacking mentality of the stock market where more people look for computer programs and the invest invest invest sale tatics that have been pushed down our throats for years. I marvel when I see stock prices rise with no change in demand or creation of a better product, purely forces at work that most people who are investing do not understand. At least if you bury your money in the back yard the collapse of the some foreign govt won’t change your savings.

    3. People need to understand that we are in this thing together. Even if you climbed that ladder to the top someone built the ladder. I would suggest we all learn to lift as we climb.

    4. Time magazine has a great discussion in the October “Money” issue puts a lot of things in perspective. Our problem is our ability to compete on a global scale not a faulty tax system that the republicans like Reagan changed with the only result of making the rich richer.

    I support the movement!

    Twitter @edsellek

    Comment by edsellek -

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  76. Some constructive proposals in the same vein for changing the status quo in the distorted capitalism we have.

    Using the right tax incentives to affect change (rather than giving an across the board tax cut):

    1. Tax incentives for hiring locally rather than trying to lower US wages to third-world countries to compete or banning employment off-shore (companies may need this for skill or scaling reasons)

    What this would require
    a. A base tax corporate rate that is the default based on its revenues
    b. A modifier to the corporate tax rates based on hiring and firing of local workers in the previous year. Hiring decreases the tax rate from the default rate. Firing reduces any reductions from hiring earlier, so the tax rate does not go above the default rate but can be reduced by companies finding reasons (like innovation) to use human capital to grow revenues rather than decreasing human capital to make street numbers.

    In theory if a company hires enough local workers, their corporate tax rate could be zero (taxes would come from the wages of people so hired). If the company prefers to hire off-shore, then that is OK. They pay the maximum corporate tax rate.

    2. Tax incentives for equitable distribution of compensation within companies.
    Companies should be free to distribute their capital anyway they want within the organization but companies that provide a more equitable distribution between levels should get tax breaks (i.e., carrot not a stick).

    What this would require
    a. Metrics for measuring salary distribution on the aggregate between levels within a company which does not restrict companies from compensating high performers over low performers within each level but provides incentives for compensating lower levels better without concentrating all rewards at the higher levels.
    b. Binding shareholder votes on executive compensation, not on the amount but on the metrics for bonuses which takes into account, not the gross margins but the return to shareholders either in form of dividends or increase in stakeholder value. Stock price is not the right metric for performance as they can vary without the fundamentals of the company changing and can be short term. Clawback provisions if those metrics are not satisfied within the vesting period.

    3. Rationalization of risks and rewards.
    Financial companies should be free to speculate as much risk as they want but not be able to mitigate that risk by implications on the tax payer or the economy.

    What this implies is
    a. All financial activities that are considered essential for the economy must be separated from speculation that has different goals of establishing liquidity or pricing. Both are needed but don’t need to be mixed. The former should be regulated like utilities. The latter should be freed from most regulations except those that constitute fraud that is vigorously prosecuted.

    b. If certain financial institutions have a risk overhang on the economy or the tax payer (because sometimes it is not possible to cleanly separate the two), then a risk-tax just like pollution-tax for such corporations. The higher the risk they pose on the economy/tax payers, higher the tax. Companies can trade amongst themselves for risk-permits like they trade for carbon permits.
    c. All public financial companies to report risk metrics in their SEC filings so that shareholders can judge suitability for investment.

    But who is going to bell the cat?

    Comment by commonmanthefirst -

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  79. I love your soapbox Mark.

    I real issue here is Greed Capitalism vs. Conscious Capitalism. As a young entrepreneur, I’ve observed that the American Dream is dead for everyone without 55 gallons of vision and entrepreneurial gusto. Given that, I’ve been speaking about and advocating for Conscious Capitalism since I founded my first company.

    The premise of Conscious Capitalism isn’t a quick read, but it’s a quick thought. It’s about people, planet and profits – in that order. And most importantly, it isn’t a shareholder model, it’s a stakeholder model.

    Think about all of the stakeholders who lose out when a company is only focused on shareholders. Hmmm. Halliburton, BP, Bank of America, oh my, I could go on and on…

    Anyways, thanks for spreading quality ideas and insights Mark. The world needs more Mavericks.

    And in the spirit of helping this movement, I recently posted “55 Awesome Occupy Pictures” that I believe show the “consciousness” behind all this. For truly, we are in this together.

    http://murfdipity.com/55-awesome-occupy-pictures/

    Comment by murfdipity -

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  82. How about 4% TIPS accounts as a required option for all 401K plans. That would mean people are not required to invest in the wall street fee machine and it would give the government a long term source of funds not dependent on the bond market.

    Comment by rootless2 -

  83. Calling you out.
    So the real challenge is how to implement all of these great ideas. I believe that it is easier to talk about change than it is to actually change something. I want to read a blog on how to get inventive ideas that will effect real change implemented. I would then like to read those comments.

    Comment by allcommercial -

  84. Why regulation over transparency? Even the article says that those that are the cause of the issue are finding loopholes in the system. Instead of mandating regulation that limits actions, why not have regulation that exposes transactions instead? Also force some due diligence by investors rather than have another government agency do it for them, which will lead to further corruption. Here’s one example. The collusion between universities and textbook publishers. My MBA books easily cost over $200 new, but if I bought them from India, maybe they were not as fancy and colorful, but it was the exact same content for about $25! Of course, there was regulation there, and that regulation was that it was illegal for me to buy my books from India. How about you open the market so I can buy a book from any provider? Don’t you think that the American book would be priced more competitively? The best way to fix these situations is if you don’t like the way a company does business, don’t do business with them!

    Comment by spaceunicorn3000 -

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  86. Mark (and my friends!),

    Great stuff. What about ridding of easy money policies that virtually guarantee (1) asset bubbles (2) de facto taxation/theft from the poor, and from savers (3)corporate/securities frauds, ponzi schemes (4) a lazy government that can always look to Central Bank for short term bandaids.

    I’m not advocating for “End the Fed” (gold is not my God), but the destructive consequences of easy money are no joke.

    Thoughts anyone?

    Comment by thelongshorttrader -

  87. Oh, one more thing:

    The reason the government never gets more efficient is because practically nobody ever gets fired or laid off from the government. If you want to seriously cut the budget, you have to lay people off. The government just plain doesn’t fire people. Ever.

    The way to fix this is really easy. You offer every government employee a multiple of their salary as a (tax free!) bonus to quit today and retire early (reduced pension/benefits included) aka the ultimate buyout. Review all the applications from employees who want the deal and figure out what positions you actually need to re-fill and which ones you don’t. Solicit independent analysis on this from as many management consultants as we can find. The goal should be to consolidate government.

    Corporations do this kind of thing EVERY DAY OF THE WEEK, there is no reason we can’t do it right now. Is it fair? HELL NO ITS NOT FAIR, These obviously not-needed government “workers” just got the sweetest deal ever. So what, life isn’t fair. Overall, and especially in the medium-long term, this is WAY WAY WAY WAY cheaper then having them continue to distort markets and promote the worst kind of malinvestment.

    Comment by rex -

    • Teachers are government employees, and we’ve seen that they are not immune to the budget axe. Are you sure that government employees are NEVER fired or laid off?

      Government is in efficient because we expect it to be. Good leadership can make government more efficient, though I’d never expect it to rise to the level of efficiency in the private sector. Because the objectives of government are different from those in tthe private sector (i.e., not motivated by profit), the efficiency of government is measured differently. Maybe we should stop trying to compare it with private industry.

      And FYI – Buyouts often lead to an exodus of the more talented and skilled employees (I’ve seen this happen a number of times). I don’t think this is what you want–your best and brightest walking out the door–unless mediocracy is the goal, but it works against making government more efficient.

      Comment by texaszag -

  88. IN response to your per share tax.

    Everyone of these black box traders classifies themselves as liquidity provider now.

    Back in the day, we used to have Market Makers and Market Takers in the pits. Market takers were of no value to anyone and would only take risk for the easiest of money. They went to lunch when a bad order came in.

    You see, all the black box traders are merely trying to read the order flow. The algo’s separate the retail paper from the institutional in a split second. And then they take.

    You used to have to be accountable, in a pit. Take the good and bad from a broker, or never see his orders let alone participate in them. You paid a price to be there.

    Now from the prices of seats, obviously they have everyone has benefited more from higher volume and selling their data to for thousands a day to high frequency traders. Except for the 10,000’s of exchange employee’s who have been axed.

    What you have to do is define who the liquidity providers will be again. You cannot tax them all, because as we’ve seen, it wont make the SEC any sharper, and the liquidity of all products are inter related and depend on each other. Whose going to buy a bonds with warrants attached if they cannot hedge them? Or be prepared much worse prices.

    The source of our problems lie at the top. The average person, even trader, financial advisor, is completely wrapped up in red tape now. Meanwhile, colossal fraud transpires at the highest level right in front of everyone’s eyes. You can never stop those people from turning a blind eye on each other.

    Comment by jimgoose -

  89. Couple things Mark,

    1. Isn’t the solution to student loans simply to treat them like all other debt and make them able to be discharged in bankruptcy? That re-introduces risk or as you said moral hazard on the part of the lender and forces them only to lend reasonable amounts to those who have a good chance of earning lots of money to pay them back.

    2. You described the CEO thing beautifully. One thing I would add is that these CEOs very badly want to preserve their cash cows, so they buy off the regulators and turn government regulatory agencies into their own errand boys to erect barriers to entry and impose high compliance costs on smaller competitors, ultimately seeking monopoly status, but many industries have settled for government-backed oligopolies. What the OWSers should be demanding is that the government reduce regulatory burden across the board, ESPECIALLY on the up front side, with permits, licenscing, etc. so that WE THE PEOPLE have a fighting chance to start our own businesses and create our own wealth. In singapore, for example, there is a one page form to incorporate a business. Find ways to make it work. We have the smartest AND most innovative population in the world, for now anyway. We can figure out a way to regulate smarter. Unfortunately, now the best and brightest are all working out ways to hack the system for profit, as you said.

    3. @ tbpsail — The idea of “insider trading” is TOTAL BS. Face facts. FACT: Human beings are not equal and some people are going to know things that other people don’t know and there is NO WAY you can prevent them from acting on it. It is better to acknowledge that top-level management (and congressmen, their staff, government agents, judges, lawyers, jury members, aren’t insider trading laws dont even apply to any of those people) can essentially “cheat” in the stock market and figure out others ways to dis-incentivize it. In the case of congress, this is obvious, the President has his assets essentially frozen in a blind trust for the duration of his term. Work out a similar system for Congress, but ideally for EVERYONE who works for the government. To make up for it, save time and money by making government salaries tax-free. Why the hell should the government tax payments from itself, what a joke. One other thing to look into- C-level compensation in stock options is so huge now, I am not an expert but it seems obvious that there has to be a tax or accounting reason for this (ie, a financial incentive for corps to compensate execs this way), and we just need to change that rule (then, of course, enforce it, which is a problem, see #2).

    Conclusion–

    OWS should not demand higher taxes (although there should be more taxes on the super-rich) they should demand government break down the barriers that corporations have placed to prevent WE THE PEOPLE from creating our own wealth.

    Comment by rex -

  90. You better watch out http://www.americanselect.org just might make you a candidate.

    HERE IS OUR CORPORATE/ECONOMIC STORY IN BRIEF…..

    Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains.”
    Thomas Jefferson

    our founding document says we the people not we the corporations……..

    the corporation as a person is a corrupt evolution via the 14th amendment that corporations used to become people. ……..

    Morton Mintz pointed out in the National Law Journal in an 1888 case that ignored the fact that “the only ‘person’ Congress had in mind when it adopted the 14th Amendment in 1866 was the newly freed slave.”

    Justice Black observed in the 1930s that in the first fifty years following the adoption of the 14th Amendment, “less than one-half of 1 percent of Supreme Court cases invoked it in protection of the Negro race, and more than 50 percent asked that its benefits be extended to corporations.”………….

    In the beginning, if you wanted to form a corporation you needed a state charter and had to prove it was in the public interest, convenience and necessity.

    Jefferson to the end opposed liberal grants of corporate charters and argued that states should be allowed to intervene in corporate matters or take back a charter if necessary.

    It wasn’t until after the Civil War that economic conditions turned sharply in favor of the large corporation.

    . . .*** The corporation killed the republican theory of the distribution of wealth and probably ended whatever was left of the political theory of republicanism as well***. . . .

    “I don’t care who writes a nation’s laws, or crafts its advanced treatises, if I can write its economics textbooks.” So said Nobel economist & one of the greatest textbook writers of them all, Paul Samuelson.

    REPUBLICANISM

    John Adams wrote Otis Warren in 1776, he agreed with the Greeks and the Romans, that, “Public Virtue cannot exist without private, and public Virtue is the only Foundation of Republics.” Adams insisted, “There must be a positive Passion for the public good, the public Interest, Honour, Power, and Glory, established in the Minds of the People, or there can be no Republican Government, nor any real Liberty.

    And this public Passion must be Superior to all private Passions. Men must be ready, they must pride themselves, and be happy to sacrifice their private Pleasures, Passions, and Interests, nay their private Friendships and dearest connections, when they Stand in Competition with the Rights of society.”

    Adams worried that a businessman might have financial interests that conflicted with republican duty; indeed, he was especially suspicious of banks……….

    Oh by the way, the Occupy protests are all against neoliberalism which is a modern evolution of classical economics. OUR MEDIA HAS YET TO CALL IT WHAT IT IS BUT IT IS NEOLIBERALISM/CLASSICAL ECONOMICS THEY ARE PROTESTING.

    The part in this link about the neoliberal Core principles is especially poignant, frightening and fits today’s conditions and politics http://en.wikipedia.org/wiki/Classical_liberalism

    TYPE IN THE WORD NEOLIBERAL IN GOOGLE NEWS & YOU WILL SEE THE REST OF THE STORY (click on archives), THE FIGHT & PLIGHT AGAINST NEOLIBERALISM IS GLOBAL.

    Funny how the most conservative “leaders” in washington are actually “liberal” & so is Obama.

    also check out neoliberal at wikipedia and learn where we went wrong. http://en.wikipedia.org/wiki/Neoliberalism

    Comment by jgbennet -

  91. I agree with your statement “I may not know much…” Beyond that, here’s a suggestion. Do a web search on “externality.” Then consider that managing externalities (like the social cost of corporate layoffs, or environmental pollution) is the job of our elected government.

    If we got back to the concept of everyone having the influence of one vote, no matter how rich they are, and not treating corporations like people, we might get back to a government that responded to the good of the majority.

    I expect corporations to manage to profit, wall street types to excel at greed, and all that that to be regulated by a competent government.

    In these current dire times, a functioning government would translate that “stress on the economy, on the federal, state and local governments which is in turn paid for through taxes or assumption of government debt” Into business tax motivation so that keeping “marginal” employees would be a good corporate business decision.

    You seem want us to rely on the “kindness of executives”, that they will be good Christians and make business decisions for the greater good. Um, how many moons circle your planet?

    Comment by comments555 -

    • In a perfect world voters , shareholders and customers would take their responsibilities seriously at which point the balance of power would shift considerably from CEOs and Politicians At that point, they would serve their constituencies rather than vice versa.

      Im a big believer that you re-earn your customers and shareholders business and respect every day. Unfortunately , we few politicians or CEOS share that perspective. As a result, it takes people putting ideas out for discussion that may just catch on. Which is why there are some very strong undercurrents in the OWS movement that will hopefully stick. Which is also why I feel good about sharing my ideas on what politicians and CEOs might consider doing if they were truly held accountable

      Comment by markcuban -

    • I think that when we concede that corporations should be driven only by the profit motive and Wall Street by greed, that’s what we get AND accept. In this environment there will always be tension between corporations and those they compete against (the people) for the attention and preference of the government. This tension is exacerbated because the government must legislate around finite resources (money, natural resources, etc.). In this environment, those with less influence (political donations, lobbyists) lose. Remember the profit and greed you spoke of? Well, those drivers will continue to influence behaviors beyond simply conducting business, extending naturally into the political arena, because greed and profit-seeking do not punch a clock. And the concept of one man, one vote has never really been much more than conceptual, as property owners during the agrarian era, industrialists during the industrial revolution, and corporations today have always had a place of privilege in our political system.

      The answer is that society should expect and demand higher levels of ethical conduct from corporations and Wall Street. It shouldn’t fall solely onto the government to deal with the mess (unemployment, pollution, etc.) created as a result of the greed and profit-seeking of corporations and Wall Street. And it should be easy enough to see–especially during an election cycle–that the barons of business do not want to be subject to the regulations necessary to minimize their damage, nor do they want to help fund the goverment in what you propose is its role of cleaning up the mess they leave behind. Who pays, then? Why the middle-class, of course!

      Some corporations are beginning to see the bigger picture and now accept that they have a responsibility to act in ways that are sustainable and with deference to the communities in which they operate and to the people that helped them achieve their success, even if it does cut into profits a little; and communities should insist on this. And on the plus side, while the short-term impact to the bottom line can be negative, usually the long-term financial impact is positive. And no, it’s not expecting Christian behavior or charity out of Wall Street or corporate America, it’s demanding that they appreciate that their success was never just a function of their own brilliance, but that society played a role as well.

      Comment by texaszag -

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  95. Hi Mark,
    Great post. Just started following your blog. Corporations have an obligation to act in the best interest of all stakeholders – and that includes, shareholders, employees, consumers, debtors, suppliers, government and an often forgotten group – future generations. Excessive attention to one (very important) stakeholder group distorts the picture. All actions tend to become very short term. The primary responsibility of a corporation is creation and distribution of wealth. And in many cases the primary distribution of wealth is to their employees – not just to shareholders. This is only right because it is employees who really participate in the creation of the wealth. So yes, corporations have a big obligations to their employees. It is often overlooked (and over time reduces the humanity of the people in power in corporations).

    Student loans, the current healthcare payment mechanisms all have distorted those markets. You are right in suggesting drastic remedies there.

    Comment by shivajisainik -

  96. I agree with much of what you are saying. I do have one strong objection within number 1. For the record i am an #ows supporter, and a shareholder, i think you are being a bit condescending about who exactly sees the potential in this nascent movement. That isn’t my objection.

    My objection is to how you characterize the choice between p/e and or dividends, and higher taxes. Higher taxes are no kind of threat in this political environment. This is why we need the movement. More to the point, however is the notion that hiring and retaining workers, or permitting the ranks of the unemployed to swell, is some sort of existential threat to historically low tax rates. the simple fact is, entitlement spending, particularly on the unemployed is only a small part of the budget. The impact isn’t real.

    This is a false choice you are trying to argue. We can handle the unemployed, the costs short term in unemployment insurance, job training, a full-on middle class dream, without really making a dent in the current taxation compromise. It is a false dichotomy to boil the choices down to higher earnings and higher taxes, or lower taxes, and lower earnings.

    From MC> Where did i mention Taxes in this blog post. Look at my previous posts for my thoughts on taxes , patriotism and getting r
    ich

    Comment by fucen tarmal -

  97. One of the reasons I read ALL of your blog posts is because you post ideas that are risky and non-traditional. I respect that enormously.

    #1 is great. I think all shareholders should be more involved. It is like voting in a political race. It is a pain in the ass for a shareholder to be so involved in a company. A person wants to do other things rather than have to think if the U.S. should have a trade war with China (political) or how the CEO should be paid fairly (shareholder). I think this can be increased by point #4. If they are taxed properly people will spend more time investing in properly run businesses or fixing the ones they are already in. Bring back the “ownership” in owning stock.

    #2 is something I would not have thought of and I love it. I want them to have skin in the game. Great idea.

    #3 I agree with it being a problem. Few other places are rates raised double digits EVERY year and service and benefit declines. I would suggest healthcare, but I am not sure the care declines. I would suggest some sort of addendum to your idea of a limit on percentage of foreign students. Living in a university town I know that it is great for diversity, but they are wealthy and don’t need loans or don’t get them from America necessarily. So maybe an unintended consequence of your idea would be even more foreign students taking the place as universities prey on them to fill the spots of American students with limited ability to get loans. Maybe another solution is basing the amount of government aid a college gets based on criteria such as:
    1) How much endowment money it has and how much of it gets distributed. The more money they have the less they get.
    2) How much tuitions go up. If they go up, they get less state funding.
    3) Reduction of other student costs. If they help cut down the book cartels and other expenses for students, they get more government aid.
    4) Attach the student loans in part to colleges so they have skin in the game. Also, maybe make a portion of them dischargeable in certain circumstances (very limited). If they have to have to actually help students not only graduate, but get jobs and not be loaded with debt, maybe they will change their behavior.

    Of course the downside could be that colleges dumb down curriculum, which I have heard already has happened.

    #4 I love.

    Comment by disfiguredskating -

  98. Mark, would it be possible for you to privatize your concerns? These guy aren’t going to change without a fight and you know it. The CEO you describe sounds sick. It’s not just the financial institutions but all institutions that need personal responsibility. The abuse of our 14th amendment is disgusting. You believe that people when sent a letter might accept less gain for the sake of jobs. Perhaps you’re right but you know that there is no way they will ever receive this letter. The buy a share idea has been around for a while.

    Sorry but this comes across as well meaning what if’s. The course for OWS should be to remain in conflict with the sickness until it is overwhelmed. Perhaps you could be the first.

    Comment by DSale -

  99. Love it. Particularly #1!

    Ever hear of Moxy Vote? We have a website that allows small shareholders to band together and vote their proxies in blocs, in support of a variety of economic and social causes, like executive compensation, corp. governance best practices, the environment. Quirky video here: http://www.youtube.com/watch?v=p1S0_ggNgkU

    Comment by moxyvote -

  100. Hi Mark,

    Everything you’ve said makes complete sense. I think it would be grand if everyone else (Ceo’s and such) agreed with you and followed this thinking.

    Then instead of the top VPs explaining that so sorry to say this, but we’re top heavy so we’re letting you and 250 of your work mates go, perhaps I’d still have my job!

    Comment by rosepetalsnthorns -

  101. Dead on with fixing the incentives by switching to partnerships. I’d also say that strict and low gross exposure limits are needed to encourage the creation of clearing exchanges. This would help prevent spidery tendrils of interlocking derivatives trades making each institution too big to fail.

    Comment by notromj -

  102. Mark, you are one of best examples of American entrepreneurship. I hope more “mavericks” like you speak up. It’s surprising that most of Hollywood and the music world (aside from Russell Simmons and Kayne’s brief appearance) are silent about #ows. Please make a few calls to the real star power personalities who stay quiet on this.

    Your points are all very valid, thoughtful, and sound pieces of advice. Thank you for your insights.

    The one very persuasive element missing to accomplish these goals is a total ban on corporate funding of political campaigns, which is one of the core ideas at the heart of occupy wall street. The supreme court of course has sided with the corporate oligarchy on this issue, but unless there is a cap on individual donations at all levels of government, and absolutely no form of corporate driven finance, no progress can be made.

    Comment by nayan1875 -

  103. Awesome Mark. Absolutely awesome.

    Comment by asutim -

  104. Great post, and I would note that I and 2 largely tie back to the same issue. Once upon a time, businesses were run by individuals and partnerships operating in the same neighborhoods that they lived in.

    In terms of personal risk and responsibility, there was the social tug to remain a respected pillar of the community by doing the right thing for the community. That, and the fiscal risk of making bad bets acted as a healthy forcing function on decision-making.

    To anyone who remembers what Wall Street was like when those firms were all partnerships, it’s plain as day how the underwriting criteria is now night and day from what it was.

    It goes back to the truism that what you incent is what you reap. We have incented business executives to ignore community, disregard individuals and pursue the greatest risk possible. What do we expect to reap with that incentive system?

    Comment by Mark Sigal -

  105. Uh oh, one of the 1% has spoken! (kidding). Excellent suggestions as usual, Mr. Cuban.

    My suggestion is to take the present rule of law that “restructuring consumer debt requires a default first”, and change that hideous law to “restructuring consumer debt DOES NOT require a default first”.

    Make this one simple change and main street can hold onto their existing wealth while beginning the process of healing economically from within.

    As it stands now, attempting to restructure a debt requires main street to bow down at the knees of the banker, beg forgiveness, accept a default, and then maybe a new deal can be hashed out, at terms that are actually worse than the ones already in place. That’s why the HAMP program was such a fiasco.

    A homeowner had to default on their mortgage payments before they could even fill out a HAMP application!

    Have a Target Credit Card and can’t afford the 22.90 interest rate because the rate was jacked by Target? Target won’t do anything to lower the rate unless you first default. So every month, 60% of the minimum payment does nothing more than go towards interest rate charges.

    Have a student loan and the interest rate on the loan is killing you? Prove it by first defaulting, at which point the damage to one’s credit rating will far outpace any new restructure.

    Debt restructure should not require a default first, this one insidious banking rule of law is killing off main street.

    Comment by alexlogic -

  106. Hello, Mark!

    It’s refreshing to hear someone of your stature and with your exposure talk this way. I strongly agree that CEO compensation should be such that the decision-makers are not so predisposed to jettison hard working Americans at the first sign of trouble. As you said, move CEOs out of the equity/lottery ticket zone and into the cash zone. Then, maybe workers will be viewed a little more humanely and a little less as simply a commodity.

    Regarding student loans, I find your idea intriguing. Something has to be done to reign in the cost of a college education. Circumstances in my family growing up made college attendance almost impossible for me and my siblings. I didn’t finish my formal education until just recently. And to be honest, back then, relatively few of my high school classmates even went to college. The emphasis was mostly on getting a high school diploma. The rules have changed, however, and a college degree now is almost a must. So as far as my kids were concerned, I decided to do everything in my power to get them the college education. Splitting the financial burden with my sons, I took on serious debt to ensure that a new family baseline was established for accepted minimum level of education. I did this with my eyes wide open, but it still sickens me to see that huge bill staring me in the face, and the realization that this is what many middle-class American families will have to go through to educate their children. A college education, especially in the wealthiest country on earth, simply should not bankrupt families. It is almost as if this is just one more mechanism to preserve a distinct divide between the classes.

    Sorry to get long-winded. Thanks for your insight; it’s really appreciated. And Go Mavs! Living in Fort Worth, me and my sons are big Dirk and Mavs fans. We look forward to the owners and players reaching a new CBA so the Mavs can get on with the business of defending their title. (It feels good to say that!)

    Comment by texaszag -

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  108. Mark, I would send this whole posting to my very large Fortune 10 company CEO, but it would probably get me fired.

    You are right on the money on your points, including the ludicrous debt load college grads will carry, and for WHAT?

    Comment by djbgumpy -

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  110. “The simplest way to change this is to place a very simple per share tax on every transaction. 10 cents a trade. Every share. Every option. Every Bond. Every currency transaction. Every trade.” Mark, that’s greatness! KMAC

    Comment by kevinmccarthy1 -

  111. Agree strongly on all but #3. It took me five years, but I graduated from college without any debt by working my ass off. I took 15-18 hours and held down a full time job. I missed out on the fraternity life and my share of parties, but have made up for it since then. I am now a successful CEO, without a MBA, because I will still out work anybody. One item that our society needs more of is a work ethic, and especially college grads and future Wall Streeters. Nothing wrong with working and going to school.

    Comment by strasj -

  112. I strongly agree with you on #3, and it’s scary how few people understand what an enormous problem student loan debt is and is going to be for years to come. Kids coming out of high school don’t realize what they are getting themselves into financially, all they know is what they have been told for years by everyone, which is that they are supposed to go to college and get a degree to improve their job prospects, and the reality is they are making a substantial investment that has now come into serious question. I don’t know about your solution because I don’t trust these institutions to adapt, but something does need to change.

    Comment by aaronehann -

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