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Tuesday, September 30, 2008

No bailout without a securities transaction tax

We heard the 'Couv's congressman, Brian Baird, on the radio this evening. The talk was all about the bailout package, which failed yesterday despite his yes vote. The show's hosts were being super-deferential to the guy -- it sounded as though he was a frequent guest of theirs -- but at one point they asked him a question that wasn't an underhand toss: Why not impose a securities transaction tax as part of the means of paying for the bailout?

A 0.25 percent securities transaction tax would raise $100 billion a year. Many other countries have one.

At that point, Baird went on the defensive. In theory, he supported such a tax as part of the package, but Wall Street opposes it, it would never get through the Senate and the White House, politics is the art of what's do-able, yada yada yada.

No. Congressman Baird, stop shoveling horse manure. It's really simple. No bailout without a securities transaction tax. If it's not in there, you vote no.

Comments (17)

That sounds like a reasonable approach.

Those requesting the bailout should be told that the collateral required is the tax. Also, the longer they resist it, the higher the tax will have to be.

At this point, who cares what Wall Street opposes. They've opposed measures to prevent this from happening at all for decades.

Baird is an interesting study in how power corrupts. Look into his background as a psychologist and his book before he ran for Linda Smith's seat --- a book about enjoying the outdoors with your family (he was still with his wife then). He was a liberal's wet dream, tacking conservative enough to win a mixed district, but fundamentally a progressive person.

Now he votes for pay hikes for congressmen, supports anything having to do with sending jobs to China, and won't say boo to a Wall St. bank. Sad.

The securities transfer excise tax seems like a good way to fund this. Apparently it has been used several times before to good effect, the tax is in the same economic sector being helped, and it makes frequent trading (including short-term speculation) more costly than buy-and-hold strategies. That last should provide at least some damping effect on price volatility.

Structure the bill so the tax persists until the public's loan is fully paid off (including reasonable interest) then automatically expires.

If I am not mistaken, this is part of DeFazio's plan as well. I know Mark Cuban also is advocating for this at his site today as well.

Cuban may not have the greatest rep around, but he seems to be pretty on top of these issues lately. I would suggest browsing his blog for more info.

It's cram down time. Yes Wall Street should kick in with a transaction tax. Also, no bailout without loan restructures for those who are innocent victims. Purchase all distressed subprime loans for borrowers who could otherwise afford a 35 year amortization with interest fixed at 5%. The FHA could administer this program. FDIC coverage increase to 250k for unwitting investors whose money market or CD is at risk.
Finally, no handouts, instead a low interest loan to troubled institutions to increase liquidity. These "sweetheart" loans should be regulated to require expenditure for lending purposes only with a cap on profit.

Better yet, structure the tax so that it persists forever, and use the revenue to reduce taxes on labor -- i.e., pay for social security and medicare with the transaction tax and get rid of the payroll taxes. Presto, you've helped more people find more work, take more home, and reduced the cost of hiring employees for businesses.

Now think for a second about what type of collateral should be required for this gigantic loan from the public pocket. Not fiat money, which can easily be diluted over a period of years, as we have seen during the past decade or so, but cold, hard, physical collateral. The primary residences of the CEOs, for example, or their physical holdings in gold, or the ownership...meaning the physical, material totality...of their companies. When they default on the loans, then the hard assets could be seized and then nationalized or sold to investors at a great bargain.

Didn't Baird go anti-Iraq to pro-Iraq?

I'd wager that one of the reasons that this tax hasn't come into play is that would require a shift in the realization/recognition paradigm underpinning US tax policy. I'm out of my depth here, but it seems like a philosophical shift in tax policy rather than an extension of our current policy. Not that it would be a bad thing, but rather its beyond Congress's ability to process on short notice.

Yeah, on short notice we could simply pump $700 billion into one unelected man's hands with no judicial or congressional review. We can't possibly take advantage of ideas that have worked elsewhere in less than a decade.

It's just a sales tax. A cheap, easy way to get about a tenth of the way out of this.

I know Mark Cuban also is advocating for this at his site today as well.

I saw that too. He suggested a $.10 tax per stock per transaction. $.05 per stock per transaction if the value of the stock is under $5. I thought that was a fantastic idea.

The other idea remains the JD Morgan approach of bringing everyone in and forcing them to open their books. It's a similar approach to the one William Isaac is proposing.

Sounds like they're going to make another run at it tomorrow and Thursday. Looks like I'm gonna be calling Murray and Cantwell in the morning to encourage them to vote no. There are some good ideas starting to come out.

This is not a tax on Wall Street. This is a tax on you and me, on our 401Ks and our kids' college funds. Why in the world would we want to tax ourselves? It won't solve any problem. It will just give the folks in Congress more money to throw around. Baird, who is normally pretty much on target, is way off on this one. The SEC took a great step today when it loosened up on the Mark-to-Market accounting rules. That should actually help solve this mess.

25 cents on $100 is not exactly onerous.
I support a capital gains tax on commercial property transactions, second homes, and the reinstatement of the inheritance tax.
The top 1 percent should pay more than 1% in taxes.
BTW... I am in the top 1%, all be it in the bottom of that 1%.
Warren Buffet and Bill Gates also support these types of taxes on the rich, so I figure I am in good company.

According to a recent poll, 17% of Americans are in the top 1%.

This is a breathtakingly stupid idea. The only effect it will have, the ONLY one, is it will kill liquidity in the market. Instead of getting minimal slippage, you will get extreme slippage. Of course, this will also effect a HUGE decrease in the volume of trading, capital wll RUN to exit this country. This tax will be, as usual, a net negative income producer, as the intelligent will simply take their money, and their revenues, elsewhere.

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