Financial transactions tax deal?

Discussion in 'Politics & Religion' started by Buzzed, Jun 25, 2010.

  1. Buzzed


    Let's pretend that the financial transactions tax was on the brink of having a serious chance of becoming law.

    And let's pretend that we had the power to make a deal with the lawmakers. They want something and we want to prevent our trade values from being taxed. What kind of deal would you propose?

    I would propose limiting financial transactions taxes to Credit Default Swaps in exchange for hands-off on basically everything else. The public sees credit default swaps as the evil of all evils, and most traders do not deal with them. Sounds like a win-win compromise.

    Just something to think about.
  2. Here's a question - how is a credit default swap any different from a equity put option considering how both are designed to let the buyer hedge downside risk.
  3. Here's a question - what do exchange traded securities have to do with the financial crisis?
  4. Nothing - I was suggesting that singling out credit default swaps is not the correct course of action.

    Credit default swaps were also not the culprit of the financial crisis. Excessive leverage by various firms made it so that they had no margin for any potential downside.

    The fact that AIG and others did not set aside sufficient collateral on the credit default swaps it was a counterparty to (as would be required by third party an exchange for example) was in itself a form of hidden leverage.
  5. They should put a transaction tax on every real estate deal one closes. "A minuscule .25% tax", as it were. Make those responsible for this crisis pay for this crisis.

    And while we are it it, a minuscule .25% tax on every auto sold to repay TARP funds while they are at it.

    Any chance reasonable minds would be heard?
  6. Try to sell short 10,000 SPY put contracts on an account with 2000 dollars cash. And imagine being able to sell more puts or calls than the amount of existing underlying.

    With CDS, you would be able to sell 10,000 CDS contracts with no collateral/margin requirements,no central clearinghouse,opaque market, no holds barred you can sell more contracts than the actual underlying in existence.

    Options equity and CDS's are two different worlds.
  7. "Any chance reasonable minds would be heard?"

    Never, what with "Cash for Clunkers", "Credit Card Debt Relief", "Housing Tax Credits", "Housing Bailout Plans", "Low Interest Loans".... a never ending list of benefits, grants, subsidies, vouchers, financial aid...

    Reckless debtors are to be pitied and investors, traders and savers are to be scapegoated.