Stop subsidizing the super rich: alternatives to the Fed rate hike

Today is the day when the mystical magic of economics is played with by people in an echo chamber.

And while the actions of Dr. Janet Yellen and the Fed are being anxiously awaited by the Wall Street Wizards, the pawns of the economy are hoping that the price of gas doesn’t jump up 20 cents.

No matter what economists and financial wizards think- Wall Street is so disconnected from Main Street (and reality for that matter) that the amount of attention paid to their fortunes is as disproportionate as the media coverage between Donald Trump and Bernie Sanders in the presidential race- despite one having substantially more donors, followers and potential votes.

Part of today’s action is boosting the interest paid on deposits big banks hold with the fed. This is supposed to “tighten” money up a wee bit- making lending slow down. This is giving more money to the people who crashed our entire economy- does that sound like rewarding bad behavior to me? Sure does.

So here are some alternatives – some of which could be enacted by Congress- which would do the same thing, and actually impact Main Street more positively than Wall Street:

  • Cap credit card interest rates at 20%. Any interest rates approaching 25% have been proven to be loans that are inescapable. In Ohio we saw toothless laws against payday lenders try to reel in these sharks, while the big banks are back to their old tricks- with bundling and reselling this high yield debt.
  • The 2009 bailout is still sending shock waves through the real estate market. We allowed millions of people to lose their homes, and even when we stepped in to “help” homeowners- the only people who benefited were the banks who all were made whole- even if the valuations were all wonky to begin with. There are still many people who asked for assistance- or even received it- that are still paying interest rates on home loans several points over what a loan is now. Offering 100% tax credits on any interest paid  last year over 5% on homes owned before 2009- would put money back in the hands of the people who have managed to struggle through the storm- while making sure not to hurt the precious bankers bottom line.
  • Enact caps on pay for companies that subsist on the public dollar. There is no reason to keep feeding campaign coffers with federal money. Here’s what I mean: hospital revenues can be divided by federal funded and insurance company funded. With the new mandate that everyone has health insurance- this basically comes down to health care is funded 100% with money from tax dollars. Yet, while the President of the United States makes a mere $400,000 a year- the average hospital CEO makes at least 3 times that. Defense contractors- make even more. Either cap salaries- or have special tax rates approaching 90% on all revenue above $400,000 a year for federally funded work- and, btw, ban them from donating to political campaigns and hiring lobbyists. No need for that circular flow of money to be subsidized.
  • And last but not least- companies that have more than 100 employees that have people on the payroll who are getting public assistance- be it section 8 housing, medicare, food stamps- etc- that money needs to be charged back to the employer. Call this the WalMart rule, call it being fair to families, but there is no reason to continue this subsidy of the rich at the expense of the poor.

Changing the federal funds rate is easy. Making real substantive changes to the real economy outside the Wall Street bubble is hard.

And one last thing- if we really were talking about stabilizing the economy, there should be a 24 hour moratorium on Wall Street trading starting an hour before the announcement. Of course, if we really wanted to start making economic policy that made sense, we’d eliminate flash trading, require stock purchases to be held a reasonable amount of time to be considered a true investment other than a day at a casino… but, that’s really wishful thinking.

If you enjoyed this post, make sure you subscribe to my RSS feed! If you wish to support this blog and independent journalism in Dayton, consider donating. All of the effort that goes into writing posts and creating videos comes directly out of my pocket, so any amount helps!