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

European Governments Devise Unusual Ways to Prop Up Ailing Banks - WSJ.com
http://online.wsj.com/article/SB10001424052970204058404577108723777515602.html

Article today on the theme I posted about last night, a few posts back. EU governments are feverishly working with banks to wheel and deal their way out of bad market perception by investors. EU governments, mostly PIIGS are arranging sale and lease backs, securitizations, exchanges of troubled government assets for weak government bonds, and more. It's all being done to smooth market perception and avoid bailout stigma in banks, and because the ECB can't bailout governments directly.

Again, FTT may be governments' planned tool to keep banks cooperating with their state-financing schemes, and to prevent banks from straying into trading and less risky investing. It's almost as if the state is nationalizing banks to do their troubled state bidding. Is FTT government manipulation of banks and undue and excessive control, in effect defacto nationalization of banks? FTT makes the wrong statement on this troubling front.
 
Letter from my Congressman:

Thank you for contacting me regarding H.R. 3313, the Wall Street Trading and Speculators Tax Act. I value your feedback and am pleased to have this opportunity to respond.

H.R. 3313 will impose an excise tax on the trading of stocks, bonds and other securities. Proponents of this tax argue that it will decrease high frequency trading and restore stability to the markets. This is not true. In fact the non-partisan Congressional Research Office reported, "Transaction taxes may have no effect on volatility, or, in some cases, may actually increase volatility."

While the trading tax would do nothing to stop volatility in the markets, it will reduce trading and slow economic growth. This bill has been referrred to the House committee on Ways and Means where it awaits further consideration.

Please be assured that I am committed to fighting onerous taxes that slow our econonomic resurgence.

Sincerely,
David Schweikert
Member of Congress
 
Quote from lindq:

Letter from my Congressman:

Thank you for contacting me regarding H.R. 3313, the Wall Street Trading and Speculators Tax Act. I value your feedback and am pleased to have this opportunity to respond.

H.R. 3313 will impose an excise tax on the trading of stocks, bonds and other securities. Proponents of this tax argue that will decrease high frequency trading and restore stability to the markets. This is not true. In fact the non-partisan Congressional Research Office reported, "Transaction taxes may have no effect on volatility, or, in some cases, may actually increase volatility."

While the trading tax would do nothing to stop volatility in the markets, it will reduce trading and slow econimoc growth. This bill has been referrred to the House committee on Ways and Means where it awaits further consideration.

Please be assured that I am committed to fighting onerous taxes that slow our econonomic resurgence.

Sincerely,
David Schweikert
Member of Congress
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It's great that your congressman gave you a real response. In California we only get non-responses such as the one I got from Senator Barbara Boxer shown below. Why does she even bother to send a canned response like this? It's mind boggling.

==============================================

Thank you for taking the time to write and share your views with me. Your comments will help me continue to represent you and other Californians to the best of my ability. Be assured that I will keep your views in mind as the Senate considers legislation on this or similar issues.

If you would like additional information about my work in the U.S. Senate, I invite you to visit my website, http://boxer.senate.gov. From this site, you can access my statements and press releases about current events and pending legislation, request copies of legislation and government reports, and receive detailed information about the many services that I am privileged to provide for my constituents. You may also wish to visit http://thomas.loc.gov to track current and past federal legislation.
Again, thank you for sharing your thoughts with me. I appreciate hearing from you.

Sincerely,

Barbara Boxer
United States Senator
 
There's a flip side to this problem. Yes, banks are unwilling to lend but consumers and businesses are unable to borrow. Consumers and businesses alike are still trying to deleverage all while they run up their credit cards during Christmas time. When I think back to the 70's and 80's (aside from normal recessions) the economy did just fine without credit cards but in today's economy a consumer without a credit card is like a person walking the streets with no clothes. It's quite refreshing to see layaway come back, however.

Quote from Robert A. Green:

FTT is a threat to compel banks to buy government bonds.

I just had the following realization, which I sensed all along, but not this specifically. Perhaps, Germany and France are intimidating banks with FTT legislation mostly to compel banks to use their bailout liquidity provided by the ECB for buying EU PIIGS and other sovereign debt. Will that be exempt from FTT in final details?

The biggest obstacle in the EU crisis is that the ECB is not permitted to directly buy new government debt, bailing out sovereign members of the EU. But, it's acceptable for the ECB to provide liquidity to banks, so banks bailout sovereigns instead. The problem remains there is no guarantee that banks will use ECB liquidity to invest in sovereign debt and lend the money out as government leaders want.

This was the unfortunate lesson we learned from U.S. TARP. The Fed and government lent and invested in banks directly, and banks took the liquidity at close to zero interest rates to simply buy risk-free assets like Treasuries, with a nice spread for profit. The government did not compel banks to lend the money to distressed Main Street, or to homeowners with underwater mortgages.

Governments often use talk of tax hikes to intimidate private enterprise into doing what they want. Germany and France might be using FTT to threaten banks, and large funds, to persuade them not to trade for themselves, but rather to invest in PIIGS debt and lend more to Main Street.

It won't work. If banks fear losing money and feel uncertainty over punishing tax changes like FTT, they will take less risk and sit on their money even more. Attacking banks is not the answer. In the old days, some European kings would banish their bankers if they didn't comply with their wishes. Those days are over.

Find a more productive way to channel ECB liquidity into sovereign debt, rather than going through banks, and wanting to control them with FTT. It's starting to sound like a farce to say that the ECB won't be bailing out sovereign debt. You are not fooling anybody.

ET friends, should I do a blog on this, or not? What do you think?
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quick update on the dutch ftt-situation: netherlands first were against, then suddenly pro-ftt, and then a lot of uncertainty. they then ordered the dutch financial institute to investigate the effects of an ftt and annoucned they weren't going to comment any further on where they stood in this until it was completed (altough it has been quite clear the minister of finance opposes the idea, but couldn't express it because he was clearly held back by other political interests).

well, the report is now completed and the headline of the url where the report is located translates as: ftt, a bad idea. and that about sums it up really. the report pretty much burns the ftt down. they conclude an ftt won't help stabilize the financial sector, will be paid also by lots of other parties with unclear side-effects, and also isn't the most efficient way to additional tax the financial sector. stuff we already knew ofcourse, but still.

the original link on the website of the institute is in dutch, but if you click on download half way down the page you get the full report in english: http://www.cpb.nl/persbericht/3211207/financiele-transactiebelasting-slecht-idee. i still have to read through most of it myself, but will report back if it contains something interesting.

netherlands may be a small country, but still a small victory for us: an official economic institute from the heart of the eurozone is agreeing with us here. it should be very hard for the dutch to not be against an ftt after this, as they announced they would base their position on it (and also left-wing possibly pro-ftt parties showed interest in this report before taking a final stance on this). there has been no political response yet, so we'll see what happens.
 
Quote from bjw:

quick update on the dutch ftt-situation: netherlands first were against, then suddenly pro-ftt, and then a lot of uncertainty. they then ordered the dutch financial institute to investigate the effects of an ftt and annoucned they weren't going to comment any further on where they stood in this until it was completed (altough it has been quite clear the minister of finance opposes the idea, but couldn't express it because he was clearly held back by other political interests).

well, the report is now completed and the headline of the url where the report is located translates as: ftt, a bad idea. and that about sums it up really. the report pretty much burns the ftt down. they conclude an ftt won't help stabilize the financial sector, will be paid also by lots of other parties with unclear side-effects, and also isn't the most efficient way to additional tax the financial sector. stuff we already knew ofcourse, but still.

the original link on the website of the institute is in dutch, but if you click on download half way down the page you get the full report in english: http://www.cpb.nl/persbericht/3211207/financiele-transactiebelasting-slecht-idee. i still have to read through most of it myself, but will report back if it contains something interesting.

netherlands may be a small country, but still a small victory for us: an official economic institute from the heart of the eurozone is agreeing with us here. it should be very hard for the dutch to not be against an ftt after this, as they announced they would base their position on it (and also left-wing possibly pro-ftt parties showed interest in this report before taking a final stance on this). there has been no political response yet, so we'll see what happens.
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Isn't trading a pretty big deal in Netherlands, especially Amsterdam? I know AllOptions is located there.
 
Re: http://en.wikipedia.org/wiki/Financial_transaction_tax

Unfortunately the Wikipedia page for financial transaction taxes has undergone some significant editing in recent weeks by a rogue editor using the name of Spitzl. This person has made literally dozens of unopposed edits over the space of a couple of weeks, many under the guise of being "minor" edits when in fact whole sections presenting the case against FTT have been either deleted or rewritten with a misleading slant (in support of FTT).

Even the "Swedish experience", a section detailing the most relevant experiment in recent times by a major economy with FTT, and which had remained unaltered for the past two years, suddenly had huge chunks missing when I checked the page earlier this week. It was not simply a case of undo-ing recent edits because changes were made on top of Spitzl's changes ("sand in the wheels" of the editing process, to use a Tobin analogy) hence restoring the facts had to be done manually.

We have work to do to restore the Wikipedia page back to something resembling neutrality. Please sign up for a Wikipedia account and contribute to the page. Otherwise when advisers take the short cut and read the Wikipedia page before briefing politicians they will get a very lop sided version of the debate (and not in the lop sided way that we would like :) )

Thanks as always to everyone for your work. But we cannot relax now just because Cameron took a stance in our favour. The political landscape can change quickly. We must redouble our efforts to win this battle.
 
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