Nail Banks with Super Taxes!

It's about taxing them, stupid.
Free trade advocate Jagdish Bhagwati believes that windfall profits taxes on the financial sector and the creation of an independent global risk management board are necessary reforms to shore up capitalism and globalization.

In a wide-ranging interview in Toronto recently, Dr. Bhagwati fleshed out his prescriptions for the world economy and also provided his take on what he calls the "Wall Street Treasury Complex" as the cause of the latest catastrophe. He is the kickoff keynote speaker at the annual conference in Waterloo of The Centre for International Governance Innovation, founded by Jim Balsillie, co-CEO of Research in Motion. Dr. Bhagwati, a jolly genius, has been special advisor to the UN on globalization issues and an external adviser to the World Trade Organization.

The cause.
He believes the issue about excessive profits and bonuses in the financial sector is a valid concern but feels it's best dealt with by taxation, to help governments pay for the damage caused to the world's economy and workers. "The incentive system is a good thing to worry about. The whole sector earns so much. Goldman, for instance, is a brand name which people are willing to pay huge fees for and which are tax deductible," he said. "Curbing bonuses will help but it won't make a big difference. Progressive taxation should come into play. There should be a windfall profits tax on abnormal profits." "Greed, avarice, self interest, self love are everywhere in descending orders of moral turpitude. There's a little bit in everyone. Here it went a bit too far." (In 2007, the worldwide bonuses paid by Goldman Sachs were equivalent to the GDP of Vietnam with 84 million people. Its New York bonuses alone were the size of Manitoba's GDP.)

A conspiracy?
Dr. Bhagwati coined the term "Wall Street Treasury Complex" which, like military-industrial complex, refers the collection of powerful and wealthy lobbyists acting in their own self-interest, from the financial community, who also, from time to time, populate the U.S. government by serving in important positions such as Secretaries of the Treasury. It's an incestuous elite who created the crisis. "We now know there were five guys from these investment banks, Goldman Sachs and Hank Paulson [former Treasury Secretary and former CEO of Goldman] involved, who went to Christopher Cox, Chairman of the Securities and Exchange Commission, and said `we don't need any reserves requirements [on derivatives]'. This led to over-leveraging and disaster," he said. "Cox was probably intimidated by the wealth of the lobby. Treasury was equally sympathetic and then Alan Greenspan came in -- it was a policy tsunami too big to resist," he said. "Greenspan came in on ideological grounds. He read Ayn Rand." "Senator [Charles] Schumer [of New York] also supported these guys. He's an arrogant kind of guy. He said `if we don't do this the investment business will go to London'. So they entered into a race to the bottom."

Controls
Unbacked derivatives and over-leveraging sank the system, and most of the players, which is why Dr. Bhagwati believes that an astute international body must review all the new financial products that hit markets: The World Risk Assessment Board or something similar. "The world needs a board with credibility and independence. When Bernanke retires, he would be a good person to be on that board. So would an academic like Ken Rogoff [at Harvard Business School]. The job would be to review all the financial instruments that are turning up all the time," he said.

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Comments

[outnow]

Certain industries are similar to viruses. Eisenhower reminded us of one such threat. We have been warned about this new threat. Noting has been done to combat the situations. Dismantling the New Deal protections was a mistake. That allowed the Fed to go on steroids and for certain personalities to outdo themselves in deregulating. The more you deregulate, the more clever and rich you become.

The challenge to our democracy and constitution cannot be underestimated. Without monetary reform, the crooks will be all over Washgington as they race to creat a banana republic out of America - f they have not done so already. And that these two dangerous industries - the MIC and the Money Industry could united against the People and establish their own shadow government behind the scenes where no audit can ever go.

[iridium53]

Better yet, raise corporate income taxes to much higher levels.
Then, give them tax shields for investment in American capital and long-term job creation - not just creaton of jobs offshore.

Let's take action and restore America's competitiveness through tax incentives that override the amoral, socially irresponsible behavior of corporate executives bent on short term gain instead of long term wealth production.

Gary P. Pisano and Willy C. Shih write that:
Decades of outsourcing manufacturing has left U.S. industry without the means to invent the next generation of high-tech products that are key to rebuilding its economy.

• Thanks to destructive outsourcing and faltering investment in research, the U.S. has lost or is on the verge of losing its ability to develop and manufacture a slew of high-tech products.

• To address this crisis, government and business must work together to rebuild the country’s industrial commons —the collective R&D, engineering, and manufacturing capabilities that sustain innovation. Both must step up their funding of research and encourage collaborative R&D initiatives to tackle society’s big problems. And companies must overhaul the management practices and governance structures that have caused them to make destructive outsourcing decisions.

• Only by rejuvenating its high-tech sector can the U.S. hope to return to the path of sustained growth needed to pay down its huge deficits and raise its citizens’ standard of living.

[AnotherMcIntosh]

"Better yet, raise corporate income taxes to much higher levels. Then, give them tax shields for investment in American capital and long-term job creation"

Good idea.

Last year, Candidate Obama promised to do away with the tax incentives currently enjoyed by corporations that ship American jobs to foreign countries. This year, he hasn't done that. Instead, he is merely promising that he might do that next year.

Last year, Candidate Obama also promised to give tax breaks to those who created more jobs in the United States. That, too, has not been done. Just more "Maybe next year."

[TJCole]

We needed to reform our entire corrupt banking Culture...and that could have only been done by Nationalizing these corrupt major banks...and then using them to stimulate the Economy...

We needed strong international regulations on the Commodities and Futures Speculation as Sarkozy and Merkel nearly begged for but Obama was against...

We still haven't learned a thing from this huge debacle especially Geithner and Obama, they just don't get it or just don't care....

Corruption is a part of the system, it's it's very life's blood...

[outnow]

That sums things up pretty well.