Thom Hartmann: How Wall Street Can Bail Itself Out Without Destroying The Dollar

[marmar]

Published on Friday, September 26, 2008 by CommonDreams.org
How Wall Street Can Bail Itself Out Without Destroying The Dollar
by Thom Hartmann


For Grover "Drown Government In The Bathtub" Norquist, this bailout deal will work out very well. At a proposed cost of $4,780 per taxpayer, it'll further the David Stockman strategy of so indebting us that the next president won't have the luxury of even thinking of new social spending (expanding health care, social security, education, infrastructure, etc.); taxes will even have to be raised just to pay for the bailout. It'll debase our currency, driving up commodity prices and interest rates, which will benefit the Investor Class while further impoverishing the pesky Middle Class, rendering them less prone to protest (because they're so busy working trying to pay off their debt). It'll create stagflation for at least the next half decade, which can be blamed on Democrats who currently control Congress and, should Obama be elected, be blamed on him.

But there's another way: Create an agency to fund the bailout, loan that agency the money from the treasury, and then have that agency tax Wall Street to pay us (the treasury) back.

It's been done before, and has several benefits.

In the United Kingdom, for example, whenever you buy or sell a share of stock (or a credit swap or a derivative, or any other activity of that sort) you pay a small tax on the transaction. We did the same thing here in the US from 1914 to 1966 (and, before that, we did it to finance the Spanish American War and the Civil War).

For us, this Securities Turnover Excise Tax (STET) was a revenue source. For example, if we were to instate a .25 percent STET (tax) on every stock, swap, derivitive, or other trade today, it would produce - in its first year - around $150 billion in revenue. Wall Street would be generating the money to fund its own bailout. (For comparison, as best I can determine, the UK's STET is .25 percent, and Taiwan just dropped theirs from .60 to .30 percent.)

But there are other benefits.

As John Maynard Keynes pointed out in his seminal economics tome, The General Theory of Employment, Interest, and Money in 1936, such a securities transaction tax would have the effect of "mitigating the predominance of speculation over enterprise." ......(more)

The complete piece is at: http://www.commondreams.org/view/2008/09/26

[TomClash]

1. There are still stock transfer taxes on the books

but they are not always enforced.

[OwnedByFerrets]

2. Love me some Thom Hartmann....smartest political commentator

without being a Rhodes Scholar (rachael)


www.wearableartnow.com

[avaistheone1]

4. You are dang tooting! Thom is a big, big brain and a great humanist too.

[Truth2Tell]

19. You mean a Randi Rhodes scholar? nt

[OwnedByFerrets]

33. IMHO, Thom is much smarter than Randi....nt

[ihavenobias]

40. Agreed, and K & R n/t

[fascisthunter]

3. ahhh... isn't Thom a Breath of Fresh Air

[Turbineguy]

5. All the discount brokers depend

on traders churning their accounts.

[avaistheone1]

7. Yup. All the trades could generate $150 billion revenue is this small surcharge were instituted tha...

could be used for the bailout.

[krispos42]

6. Thom Hartmann for Treasury Secretary!

Or at least Obama's economic advisor. :-)

[lapfog_1]

8. How is this done?

For example, we cannot tax transactions that happen in another country. So, to collect this tax do we forbid the transfer of securities outside of the US? And if we did that, would not the people who are serious traders simply acquire those securities originally in a foreign exchange and leave them there?

People are usually very good at avoiding taxes like this (or any tax). What's to prevent them from avoiding this one?

Also, why is it needed? He already states that the agency (Trust Corp) would borrow money from the treasury and then repay it with the tax. Why not simply sell the assets that were purchased with the borrowed money (that's the current plan). The tax revenue is somehow "better" than revenue from asset sales? The whole idea behind the current plan is that the government (Trust Corp) can hold onto those assets for much longer periods of time than an investor or investment house. In addition, when be buy the asset from Wall Street, I'd like to see us get some equity in the Wall Street firm... and that's another source of upside potential which is not present in the tax scheme. And that's a pretty safe bet too (once the trash is cleared, Wall Street balance sheets will look pretty good).

I'm sorry, I just don't see how this is so much better than the current proposals.

[OwnedByFerrets]

14. Its just like the National Health Care plans that are

successful in every other industrialized country in the world. WE DON'T HAVE TO RE-INVENT THE WHEEL!! There are already great plans out there for us to replicate if we only had the sense to do so. Many countries, including Great Brittan is using this type of taxation and it works great. Unfortunately, this country is too fucking stooooopid to use good ideas thought up by other countries.

[lapfog_1]

15. But you haven't addressed any of my questions

starting with the last one... why is this needed?

His plan still buys the bad debt of wall street and, therefore, requires us to print $700B. Whether this is paid back by selling those assets or collecting a tax (Bernie Sanders proposed a 5% excise tax on any single taxpayer making over $500K and couples over $1M a year).

So we are still printing the $700 B initially.

And the current plan has the ability to pay back the $700 B with interest without taxes.

Pass the tax and use it to FUND the national health care or infrastructure or whatever.

But we don't need it for this bailout.

[bertman]

16. Why is this needed?? lapfog_1, my unenlightened opinion is that it's needed so we DO NOT APPOINT THE

FOXES TO GUARD THE HENHOUSE as BushCo/Paulson are trying to get us to do. We don't have to rely upon someone else to "value" the stock. It's traded on the open market and the tax is levied.


I think this is an interesting idea, but my initial take is that it's a little on the LOW side. Why not start out at .35 or .4, then as the payoff continues, lower it to .25?

[lapfog_1]

18. The markets value the stock.

as always, I think what you meant was the valuation of the assets. And, yes, that is a concern. We need to pay enough over "book" (present value) of the asset to actually make the investors somewhat whole and yet not overpay for the asset so that we can be sure of a gain when the Trust Corp goes to sell it. I think we could ask for state and local help on this, giving the job to county tax assessors or hire some now out of work real estate sales people.

Regardless, this is a risk with any bailout scheme (Hartman's included) so even if you endorse Thom's plan, you need to take this into consideration and come up with a way to "keep the wolves from guarding the hen house".

The fundamental problem here is that almost everyone on DU (and by extension, the country) thinks this is "giving" wall street $700B. In reality, this is very similar to the Chrysler bailout of a few decades ago. The taxpayers made out like bandits on that one. Paid off early too.

What Hartmann proposes here is an additional way to recoup the "loan" or "expense" aka our investment in real estate. It fundamentally does not change the way the bailout works (for that, you need to consult the House Repukes and their bullshit plan).

Worse is that this isn't a tax on "Wall Street". Brokerage houses will not absorb this tax and take it out of their profits. They will pass it right along to the investors. All investors, not just the greedy ones that were buying risky assets that paid high ROIs. And who are those investors? We are. Our pension funds, 401Ks, IRAs and everything else. We would pay this. Not the executives with their $30M parachutes. And we would have no equity in or control over the remaining Wall Street firms.

You want to tax securities trading, fine, but just put the money into the treasury and don't link it to this "bailout".

[On the Road]

32. If a New Federal Agency is Created,

wouldn't they just become the new guards for the henhouse? And wouldn't they likely be foxes in your estimation under a Republican administration?

[Winterblues]

17. So you are suggesting no America stocks will ever be traded again

If this goes into effect? I find your view unrealistic..

[lapfog_1]

21. It's pretty easy to trade on some other index other than

the NYSE and the NASDAQ. They have made it quite easy to do. Will the NYSE go away? Of course not. but I bet only small investors will be left. Any large block trade will be done elsewhere.

.25 percent of a $2 million dollar trade is $5,000.00

Pay me 10 percent of that and I'll move it overseas and trade it for you in Europe or China.

And 10,000 other "smart people" will set up systems to undercut my price.

The investor/trader is going to be very interested in saving $5,000.

[Greyhound]

20. There is no way to avoid a sales tax.

The tax is added to the recorded transaction and collected by the brokerage. Just as you can't buy a sandwich at 7-11 without paying the sales tax, you wouldn't be able buy or sell financial instruments without collecting the tax.

That's specifically why they hate this idea, there is no way to avoid it.

Check your other post.

[lapfog_1]

22. What is the sales tax on buying a sandwich over the internet?

Especially a sandwich from China?

Especially as the sandwich isn't ever going to leave China.

And when I sell the sandwich for 10 percent more that I paid for it... who is going to collect a tax on those trades?

We live in a world market and in the internet age. These are not sandwiches, but simply numbers in a computer. Easiest thing in the world to buy/sell anywhere in the world.

[Greyhound]

24. Ant broker is licensed and is required by law to comply with all the regulations.

What is so hard to figure out about that? Secondly, the origin of the sandwich is irrelevant, if it is traded on the American exchange ti is taxed, just like every other market with such taxes.

Lastly, you apparently have not done any trading of stocks if you don't get the mechanism. There are literally thousands of sites and even more resources if you want to open an account.

[lapfog_1]

25. Dude - are you really that dense.

I'm not using a licensed broker in the United States. I have an account in a brokerage house in, say, Germany or someplace. I place my trades over the phone or online. (in the example)

I trade stocks all the time.

And if there is a tax on my trades, it won't be enough money for me to move to another country. But if I'm a big trader or fund, I sure the hell WILL open accounts all over the world and use whichever one is optimal (for me) to sell millions of dollars of stock in a single trade. I will very likely have a computer program that will calculate where the optimal trade will take place and makes all of the arrangements (if i don't have shares of stock XXX at account YYY, it will borrow them from somebody that does, makes the trade, moves the money to my Caymen Islands bank account and then covers my borrow by initiating a transfer from my ZZZ account in Zurich to the YYY borrow account).

[Greyhound]

26. Firstly, your epithet is uncalled for and if your going to ask stupid questions at least use a (?).

It doesn't matter where your broker is, if you want to buy or sell on the NY exchange you pay the tax. If you want to buy or sell an asset on another market it has nothing to do with the tax, but since most markets already have some form of tax or fee I guess you will be limiting yourself to trading in one of those other markets.

I suspect that are simply being disruptive since you have been given numerous answers to your asinine questions and you persist in pretending to be too stupid to live.

Now, go away and sink your money into FOREX.:rofl:

[lapfog_1]

27. You are the one that persists in being stupid.

I'm not trading on the NY exchange. You act as if it is the end all and be all of the universe. We are RAPIDLY becoming a third world country and so, too, will our stock exchanges... think not? Then you are a bigger fool than even I have taken you for.

The big stocks are going to be traded elsewhere, adding a tax to trades done here will only cause them to move to those exchanges more rapidly.

No one has proven how taxing stock trades is any better or different than any other method (including the one in the current proposal before congress) of "paying" for the $700B. Are we not still printing this money initially?

Hartmann is a smart person, but he has some very myopic attitudes. He likes this tax. So he trots it out and attaches it to the bailout scheme. The real thing is that what he and others are doing is using this liquidity crisis to promote their pet social engineering changes they want to make. Just like the repukes with their 0 percent cap gains tax. This isn't the time to experiment with the tax code. Besides, no one has yet made the case that IF we bailout Wall Street, how will we "lose" $700 B dollars on the deal over 20 or 30 years (whatever it takes to liquidate the assets at a profit), even allowing for inflation? And if we aren't going to lose money on the deal, why do we need any new tax to pay for it?

BTW, being called dense is not an epitaph, only an observation. I kept stating over and over that I'm not using US based brokerages nor US exchanges (in my example) so I am trying to understand how we would collect a tax on that trade. And so far, not a single person has demonstrated how this would be done. Nor have they demonstrated that people would not take steps to avoid the tax, given that it is easy to do.

[Greyhound]

28. You are beyond the pale. The word is epithet and Dictionary.com

is available. If you don't trade on the NYSE or NASDAQ this is not an issue for you to worry your beautiful mind over.

You seem to be so blinded with fear (unless of course you are being paid to disrupt discussion) that all reason is beyond you. That is exactly the reaction this is meant to invoke.

The idea that the largest and most profitable company's in the world are going to withdraw their listing on these exchanges because of a .25% tax is ludicrous at best. I have not noticed any exchanges on earth that have close because of imposing fees or taxes on their transactions. The American stock markets are the largest on the planet because we are the most stable and effectively control the global economy, so take your money and go elsewhere, we will muddle through without your few thousand bucks.

[Greyhound]

29. Oh, and go buy some GE shares on the Shanghai Exchange. Oh wait, you can't.

Maybe you just misspelled your name, we already know you have a fairly limited vocabulary, did you mean to call yourself lapdog?

[lapfog_1]

30. What you meant to say was "you can't YET"

I expect that this will change.

Very few companies feel loyalty to a particular nation anymore. Much less to an exchange located in a particular nation.

Or do you disagree with this as well?

And since we are headed down this path of name calling... how did you get that handle of yours? You live in a 1966 Greyhound bus perhaps?

[Greyhound]

31. ROTFLMAO.

:rofl::rofl::rofl::rofl::rofl:

Riiiight...

:rofl::rofl::rofl::rofl::rofl:

[Fresh_Start]

9. tax should be higher for stocks held for short period of time

than it is for stocks held for long period of time

Reduce speculators without as much impact on longterm investors
We want longterm investment

[FreakinDJ]

10. Kick from the "This Makes Too Much Sense Club"

[avaistheone1]

23. It does.

But if the idea is not the leadership's personal brain child - I wonder if it has a chance in hell.

[JDPriestly]

11. Wonderful

Reid stated that the Republicans want to lower the capital gains tax as part of the deal.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x198830

How stupid can they get?

[marmar]

38. "How stupid can they get?"

You probably don't even want to know that answer.

:dunce: :dunce: :dunce:

[Cleita]

12. He's talking about this article right now on his radio program. n/t

[OwnedByFerrets]

13. We should send this link to every congress critter....its

that important and pertinent.

[crickets]

34. K&R! -nt

[Joe Chi Minh]

35. Sounds great.

[Duppers]

36. K & R

damn good suggestion!

[aint_no_life_nowhere]

37. I hope our representatives in Congress look at this and all other options

I don't want them to rush into this bailout thing, because we'll be stuck with the consequences for a long time. I don't think the Democrats should try to get the Republicans involved, if the Republicans want to pursue their own dubious solutions. The Democrats should strike out with a plan of their own and be brave enough to pass it and not be worried about carrying the blame for a bad decision. Instead, they need to proceed slowly, cautiously, and make the best possible decision after having considered all possible solutions. The Democratic leadership like Pelosi and Reid need to consider what's best for the country, and not just what's the best way to ensure their chances for re-election.

[Frank Cannon]

39. Won't this be viewed as a tax on 401-Ks?

I mean, this tax would just be passed on to whoever holds the shares, correct?

Forgive me for my ignorance. I don't know a whole lot about this stuff, which is probably why I'm perpetually broke.

[Frank Cannon]

44. Since no one responded, I assume that means "yes".

Good luck getting something like this passed.

[jwirr]

41. I tried to forward this to Senator Dodd but I am not from CT so he does

not accept the email. Will someone from CT please email this to him for me. Thank you.

[Raksha]

42. So simple and so brilliant...the Edison Gene strikes again!!!

[jpgray]

43. Again the major problem becomes--how do you pass it?

We have a sixteen seat majority, undermined severely by the presence of forty-seven blue dogs. Taxing wall street is not going to fly at all with the GOP, and the blue dogs will flee precipitously on any controversial showdown.

[malaise]

45. It can't

Here comes the Shock Doctrine in full force.