Cut Wall Street Down to Size With a Financial Speculation Tax

[Donnachaidh]

http://www.thenation.com/article/161257/cut-wall-street-down-size-financial-speculation-tax

If you want to transform the economy, you have to cut Wall Street down to its proper size. One way to do that is to tax the short-term speculative activities that dominate and distort financial markets.

For ordinary investors, the costs would be negligible, like a tiny insurance fee to protect against crashes caused by speculation. But for the highfliers who are most responsible for the financial crisis, the tax could raise the cost of highly leveraged derivatives trading and stock-flipping enough to discourage the most dangerous behavior.

Remember the “flash crash” of May 6, 2010, when the Dow plummeted nearly 1,000 points? If a tax of only 0.25 percent on each transaction had been in place for just the twenty most frenzied minutes of that day, traders would’ve faced $142 million in fees.

And remember AIG’s credit default swaps? A financial speculation tax might not have stopped those greed-crazed fools, but at least Uncle Sam would’ve taken in about $1.1 bil-
lion on the deals.

More at the link --

[spin]

1. K&R (n/t)

[northoftheborder]

2. I've heard this suggested before. good idea.

[slipslidingaway]

3. knr - 1993 ...

found this when searching for a clearer definition of notional vs. actual dollar value of derivatives. And it had been proposed by others back in the 1980's.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=103&topic_id=351988&mesg_id=352021

http://american_almanac.tripod.com/derivcw.htm

"...With what are now called derivatives, we move from investment, and purchases and sales of hard commodities, to speculating on the future price or yield performance of what were once investments, and relatively simple, economically necessary transactions. It would be like going to the horse races to bet, not on the race, but on the size of the pot. Who would care about what's involved with getting the runners to the starting gate?...

...proposed that America reassert sovereign control over its power of credit issuance through the transactions tax. The tax will also introduce transparency, and help show exactly what will have to be done to reconstruct the nation's rotten bankrupt banking system. Half of the $12 trillion outstanding derivatives in the U.S.A. are carried on the books of the top ten banks, like Citibank, J.P. Morgan, and Bankers' Trust. Their paid-in capital is many times exceeded by what they have helped to let loose.

Such tax proposals have been made before. The financiers fiercely resisted them, and usually prevailed..."

[Kaleko]

4. No shortage of good ideas.

But the vampire squid won't let go of America now until it's sucked the last bit of blood from the desiccating corpse.

[madrchsod]

5. make them take possession of the commodities they buy...

that will shake out a shit load of speculators

[girl gone mad]

6. k & r

[sendero]

7. This would effectively put an end to high speed trading.

...and that would be a very good thing. But I doubt that this is going to happen.