1/4% Tax on all stock trades pushed in NY Times today

Mervyn King, Governor of the Bank of England, dismisses the Tobin tax:

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The whole meeting can be viewed here, though maybe not outside the UK:

http://www.parliamentlive.tv/main/Player.aspx?meetingId=5708&player=windowsmedia

 

Since this forum edits certain letter combinations in our posts, perhaps in the future to link to such sites above use the tinyurl system so that others can see the articles referenced.

 

The shortened Daily Mail URL:
http://tinyurl.com/ydk7kqa

A similar article from the Telegraph :
http://www.telegraph.co.uk/finance/...in-plan-allies-himself-with-Barack-Obama.html

Mervyn King rubbishes Gordon Brown's Tobin plan, allies himself with Barack Obama

Gordon Brown’s attempts to cast himself as the architect of financial reform were dealt a humiliating blow on Tuesday after the Governor of the Bank of England rubbished the Prime Minister’s flagship proposal and allied himself with President Barack Obama.

Addressing the influential Treasury Select Committee, Mervyn King dismissed Mr Brown’s plan for a tax on financial transactions, the so-called “Tobin tax”. He said: “I don’t know anyone on the international circuit who’s enthusiastic about it ... Of all the measures being considered, the Tobin tax is probably at the bottom of the list.”

The Prime Minister has been a staunch advocate of the tax since first floating the idea at November’s G20 meeting at St Andrews. Earlier this month, he wrote in a newspaper article that “the IMF is looking at ... a global financial transactions tax” and, in December, the Treasury said “international coordination is both feasible and enforceable”.

Mr King said there was “much more support for a US-type levy” to create an insurance fund to bail-out the banks in the event of another financial crisis. Although Mr Brown also raised the prospect of an insurance levy at St Andrews, he made it clear he favoured a Tobin tax.

President Obama has announced plans to raise $90m from banks in the US with a 0.15pc tax on their unfunded balance sheet. The Governor said the structure of the US levy could be used to build up a resolution fund for future crises.

In a further veiled attack on the Government’s plans for financial reform, Mr King said “tinkering with capital requirements is not enough ... structural changes are required”. He expressed support for the “principle” of President Obama’s decision to break up the banks by banning them from conducting proprietary trading or operating in-house private equity firms and hedge funds.

Mr King, who is considered an advocate for smalller banks, said the US plan “certainly has relevance”. The Bank’s show of support was made despite the admission by Paul Tucker, deputy Governor, that that “no one has the faintest idea how to define prop trading”. He added: “Banks should be less risky businesses. We will learn a lot in how they define prop trading.”

Mr King has become increasingly political in recent weeks, undermining Labour’s early election campaign by warning homeowners earlier this month that the next two years will be characterised by economic hardship and rebuking the Government for failing to set out a clear strategy to cut the public deficit.

He has been aligned with the Conservatives after George Osborne, shadow Chancellor, said the Bank would take over full responsibility for banking supervision under a Tory government.

 

Robert you were very impressive on camera...very calm, have you thought about a career as an actor?

Jokes aside, if you could get an interview on CNBC or Bloomberg TV I think you would be a good voice for us.

 

Thank you for your kind comments on my video for moneyshow shot in Vegas in Nov.

 

A report that FTT supporters sometimes refer to:

 

Another:

 

thanks

 

A journalist contacted me for help with his story on the financial transaction tax. "As discussed, I’m writing a story on DeFazio’s jobs bill, H.R. 4191, for Money Manager’s Compliance Guide (Jan. issue attached). Our readership consists of registered investment advisers, with a small proportion of subscribers being advisers to hedge funds.

Mr. Green,
I’d like to quote you in my story, if I may. You wrote for Active Trader’s February issue concerning the small investor exemption of $100,000 in Mr. DeFazio’s bill, “This exemption is a mirage; the poorly priced markets will have higher or lower prices and that will cost every investor – buyers and sellers,” Could you elaborate just a little bit more on what you meant by “poorly priced markets” and possibly spell out how the tax would have an effect, e.g., would the tax inflate price? I’d also like to invite any further comment you have on the bill in general. Do you still give the bill -- or similar proposals -- a low chance of passing Congress? Since publication of your article, congressional democrats have been dealt several setbacks, i.e., the GOP win in Massachusetts. Do you think that changes the game for the worse for this bill or – not to put words in your mouth – but were chances already pretty slim that the recent developments don’t make a difference? Just wondering what else you might like to say in support of your opinion, if anything.

Here's my written answer to him. We talked for a long time after.

Green reply: Poorly-priced markets means wider bid and ask spreads and less liquidity due to many small-business traders (ECN market-makers) going out of business and remaining traders having less incentive to speculate and actively trade. Your inference is also correct, some traders will consider the financial transaction tax to be an additional transaction cost they seek to recover by asking for higher sales prices and lower bid/purchase prices too. So even if a small fraction of investors are exempted in the bill from paying the transaction tax themselves, the transaction tax paid by the person on the other side of their trades will translate into higher purchase prices and lower sales prices, which is tantamount to the exempt investor sharing the tax burden with the taxed investor. Secretary Geithner reached this same conclusion stating this tax would fall too-heavily on the retail investor.

By the way, some proponents of the financial-transaction tax are currently citing the existing UK stamp duty (financial transaction) tax as good working precedent for a financial transaction tax. That precedent is being purposely miss-marketed and it’s in fact a bad precedent. Market-markers and other qualified market participants are exempt from the UK stamp duty tax, and that exemption translates to 70% of transaction volume. The UK stamp duty tax falls entirely on the retail investor, which directly contradicts the intention of the US administration. I believe that UK domiciled residents get an income tax credit on their stamp duty taxes paid too and that is not part of any financial transaction tax plan in the US. I believe the UK stamp duty tax is intended to capture taxation on non-domiciled residents of the UK on their otherwise non-taxed offshore accounts.

The US administration's new bank fee plan addresses these glaring problems of taxing the small retail investor. The US bank fee falls directly on the largest banks and financial institutions operating in the US and the bank fee is intended not to be passed on to small retail investors. This is why the US made their choice of a narrow-targeted bank fee and Volcker Rule over a shotgun financial-transaction tax with many unintended consequences falling on investors. The UK, IMF, Europe and G-20 are now also embracing the US bank fee/levy approach over a financial-transaction tax.

The other big problem with taxing transactions is that transactions will quickly move to unregulated and foreign exchanges where the tax is not implemented. The Chairman of the German exchange just made this important point too. Sweden learned its own lesson from implementing a financial-transaction tax in the early 1990s; their financial exchanges plummeted in value and transactions and Swedish stock listings moved to London. Sweden repealed that tax soon thereafter. Sweden is strongly telling Europe now to not make this same mistake and to use a bank levy instead.

The current financial transaction tax bills in Congress are now faulty and I believe they can not be voted on as structured. Both the Senate and House bills cite TARP funding and losses as a reason to pass a financial transaction tax to pay back TARP losses. The US administration's bank fee plan provides another preferred-road map for paying back estimated remaining TARP losses. Plus, TARP recipients, including the banks and even General Motors now have announced plans to fully repay TARP too.

There are other problems brewing for current Congressional transaction tax bills and administration's bank fee plans too. Attorneys for Wall Street claim the bank fee is a tax and it's punitive against Wall Street selectively. Targeting a small niche selectively for taxation and punishment is unconstitutional. Senator Hatch said last night that the health care bills are unconstitutional because the federal government requires citizens to purchase health insurance (and based on the other special deals that were made too). In light of the very recent ground breaking Supreme Court victory for corporations on the first amendment (advertising rights), I expect more constitutional threats against the financial-transaction tax and the bank fee too. I think the administration will win the bank fee, as it’s not a tax in my view. But think about how the Congressional bills are titled. Let Wall Street (a tax) pay for Main Street. That is unconstitutional in my view.

In my view, we are winning the financial transaction tax fight.

One other threat on the horizon is that celebrities are expected to start doing promos for the financial transaction tax - as a global tax to fund social causes - for Oxfam International. I already wrote a blog on this to tackle these celebrities and this approach. I am waiting to see it happen before I launch my rebuttal. If you are interested, I can share this with you.

The Scott Brown MA senate victory does change things. It weakens progressives further as the President may feel he needs to move (or head-fake) to the center. Some Democrats think the President should move back towards his progressive base instead. Even if the President does, there are not enough votes in the Senate to pass a financial transaction tax bill, even if one is re-submitted. The President and his chief-of-staff Emmanuel chided Rep. DeFazio in late fall over his incessant pushing for the financial transaction tax.

The President is taking the lead on tax changes now in his budget due by February 1st and he wants the bank fee and Volcker rule over any other choices for having banks pay-back TARP. The President’s team knows full well that banker bonuses and other selective taxation against Wall Street can be challenged on constitutional grounds. Rep. DeFazio is a big loser here!

 

FT.com --- Sarkozy's fiery Davos speech, complete with applause.

He will find the global stage a lonelier forum , with Gordon's influence soon to disappear.