There have been many stories over the last couple weeks about Wall Street Bonuses. The bonuses are given after many of these institutions recovered huge profits in 2009. However, the source of the investments that led to the profit comes from us, the taxpayers, in the form of the Troubled Asset Relief Program (TARP.) Reports suggest that the largest firms receiving these funds are giving out over $90 million in bonuses. The outrage comes, logically, as it seems that the money that the government invested was meant to jump start the economy and get the same banks making loans. Instead of making loans, however, many many millions have gone directly to bank execs and investors, the very people blamed for the economic crisis. As a result lawmakers are looking at ways to regulate or even tax these bonuses. The UK has already instituted large taxes on bonuses. Our own congress is debating 50% taxes on bonuses over $50k and using the tax to help small and midsized businesses. Instead of adding more bureaucracy to these funds, the government should consider encouraging a ‘good returns,’ or social venture model.
I propose giving tax cuts to people receiving these bonuses if they invest 100% for a year or more in social ventures. Many organizations have begun giving microloans to the nation’s and world’s poorest people, helping spur entrepreneurship among the most poverty stricken people, as we heard at our second Spark Club meeting from Salah at Soap Hope. His organization withholds a year of profit to grant microloans to women in poverty in the DFW area. These loans are repaid and there is only a 2% default rate. However, the businesses and entrepreneurship spurred by these loans create further wealth in the community, potentially making more customers for Soap Hope and the businesses they have inspired.
I am all for spreading the wealth, however the Robin Hood methods of government agencies moving wealth from one place to another has proved inefficient and unsustainable. Social Ventures and microfinance however are offering very interesting models that are creating social change that is sustainable. If the government wants to do something about these greedy bastards and their fat cat bonuses, stop looking at old tax and regulation policies and start looking at ways to inspire social good.
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- New York AG Andrew Cuomo Demands Wall Street Pay Info (dailyfinance.com)