The Occupy Wall Street movement has gained a significant amount of traction by bringing to the forefront the general discontent that many Americans have about their future financial well-being. In essence, the "We are the 99%" slogan helps capture the general perception that the current financial system is not meeting the needs of the majority of the populace. While most people realize that something needs to be done, no one has promoted a clear and concise agenda. Accordingly, I believe the following proposals need to be recommended to the proper elected officials in order to initiate the necessary changes that will help move the financial system in the right direction. (For more on the movement, read How Protests Could Change Banking.)
TUTORIAL: Economics Basics
Reinstitute Banking Segregation
The recent financial events that almost derailed the banking system in the U.S. spurred the ideology of "Too Big to Fail." As a solution to this problem, a strong case can be made to reinstitute anti-trust legislation. While such legislation can take many forms, at a minimum, commercial banking institutions should be prohibited from engaging in investment banking activities, any type of activities that use derivative securities and any type of insurance activities. By following these recommendations, not only will the financial services industry be more robust, but the pitfalls of deregulation will be counterbalanced.
Require 20% Collateral for All Loan Activities
The importance of collateral as part of the lending activity process seems to have been overlooked by many borrowers and lenders alike. Collateral is vital to ensure that borrowers honor their loan obligations and lenders maintain the necessary funds to protect the potential negative ramifications of their lending activities. Given the recent problems associated with the lending industry, it appears that collateral in the amount of at least 20% is required in order to maintain an orderly lending process. Banking institutions should also be held to the same standard in terms of maintaining their reserve requirement. By following these simple guidelines, the likelihood of borrowers defaulting on their loan obligations will be dramatically reduced, and the risk of a "run on the bank" will be greatly diminished.
Simplify the Individual and Corporate Income Tax Code
If the goal of tax reform is to simplify the tax code and make it more equitable, there is a simple solution to resolving the problem. By simply eliminating the requirement for individuals and corporations to annually file income tax returns with the IRS, all loopholes, tax credits and tax deductions will be eliminated. Once this provision is implemented, the tax system should reflect a progressive income tax structure, where all individual income, dividend income and capital gains are subject to the appropriate marginal tax rate, and all top line corporate revenue is subject to the appropriate corporate tax rate. The appropriate tax rates can be determined after the impact of scraping the tax code has been evaluated over time. By making these changes, the tax system will be more logical, simplistic and equitable. (For more information on some of the changes that have occurred in the tax system, read A Concise History Of Changes In U.S. Tax Law.)
Create a Consolidated Union for the Financial Services Industry
Recent history has shown that the wisdom and ethics conveyed by the key executives in charge of the financial system, as well as the regulatory agencies that are responsible for monitoring its operations, have not lived up to the scrutiny of prudent expectations. Whether or not the root cause of the problem is greed, corruption, ineptness or a lack of common sense is open to conjecture. Nevertheless, a valid solution that promotes integrity, accountability and equality needs to be implemented. With these goals in mind, it seems prudent that the creation of an organized union for the financial services industry should be established in order to help promote a solution in the form of organized checks and balances.
The Bottom Line
Over the last couple of months, the Occupy Wall Street movement has captured the attention of the public but has yet to promote a clear and concise agenda in a constructive manner. With the upcoming presidential election less than one year away, I believe that now is the time for the Occupy Wall Street movement to directly lobby the Senate Committee on Banking, Housing, and Urban Affairs as well as the House Financial Services committee in order to garner their support for changes outlined in this article. By following this approach, the policies endorsed by the general populace are more likely to be implemented by elected officials in an orderly and timely manner. (To find out about other protests on wall street, read 4 Other Wall Street Protests You've Never Heard Of.)