Publisher's Note: My money, my rules
By Jody Reese
There’s nothing more American than the story of Bill Gates or Warren Buffett. Both rose from upper middle class backgrounds to be the richest people in the world. Few begrudge them a dime of their fortunes. So why then are so many people upset by the huge amounts of money earned by bankers and investment folks on Wall Street? Just like Gates and Buffett, they have the right to earn billions, don’t they?
I think most would agree that if Wall Street earned its money like Buffett and Gates no one would have an issue with its pay. But in fact we were forced to spend almost a trillion dollars to rescue Wall Street and we support them with tax incentives and low interest rates.
The controversy over Wall Street pay and earnings is about fairness. It’s a bit like having a grown kid who lives with you but doesn’t pay rent or help with groceries and then goes out and buys a nicer car than you drive. But Dad, your son says, I bought it with my money.
It is perfectly fair to tell your kid that he has to pay his fair share in contributing to the family even if that means he can’t afford to buy a fancy car. The same goes for Wall Street.
Just as your kid enjoys the fruits of living in your home, Wall Street enjoys the fruits of making money with the support of the federal government through all sort of programs, regulations and policies (whether we should keep doing this is another matter).
A great example of the federal government’s largesse is artificially low interest rates and free money available through the federal reserve to most Wall Street firms and banks.
Americans lost $250 billion in interest on their savings, according to an op-ed in the New York Times because of those artificially low interest rates. Wall Street benefits because we savers try to find a higher return and move our money into the market and Wall Street gets a cut.
These low interest rates also make it cheap for companies to buy and sell each other — a key way Wall Street makes money.
Wall Street also uses the free money it gets from the treasury to make its own trades. Imagine if you could get free loans to play the market.
So if the government is creating much of the market and the wealth it produces, then how is it a free market?
Wall Street did very well in 2009 with the full force and support of us, the taxpayers. Now our country is struggling with huge deficits and other social problems.
It seems to me that it’s fair to ask our kid to sell the fancy car and help with the mortgage.
It’s unlikely we’re going to boot our kid out on the street, but if we’re supporting him, then we need them to support us too. It’s only fair.
Over time the kid will move out on his own and we’ll have saved enough to pay off the house and everyone will be happy. Here’s hoping.