Wall Street waged war on the American economy and middle class with its reckless gambling.
It wasn't Fannie Mae or Freddie Mac that crashed the economy. It wasn't the federal government. It wasn't hapless homeowners who were sold mortgages they couldn't afford. It was Wall Street financiers that aggressively sought and bought mortgages to package and sell as derivatives, which the banks could wager on.
Americans bailed out Wall Street, handing it a Marshall Plan for reconstruction after its bad bets blew up the world economy. Now, three years later, happy days are here again for the Wall Street banksters. They're hauling in big profits and paying outrageous bonuses. But the American middle class continues to suffer high unemployment, record foreclosures and rising poverty.
So it's time for Wall Street to pay reparations. It's time for a crash tax, a tiny sales tax on Wall Street transactions, the revenues from which would pay for Main Street restoration. It's time for the 1 percent to repay the 99 percent, for Wall Street to share in the sacrifices necessitated by its rogue behavior.
The levy, sometimes called a Tobin Tax after the American economist and Nobel Laureate James Tobin, who endorsed it in the 1970s, is far from shocking or novel. A financial transaction tax is advocated by a huge range of groups and individuals, from billionaires to conservative heads of state. Thirty nations, including Great Britain and Switzerland, already tax some financial transactions. The United States imposed a similar tax from 1914 to 1966. In addition to raising revenue in a time of government deficits worldwide, the tax would suppress the very kind of risky speculation that got the global economy into this mess.
Supporters of the tax include the expected -- the AFL-CIO, Democratic benefactor George Soros, consumer advocate Ralph Nader, and economist Dean Baker, one of the few who saw the housing bubble and predicted its bursting. The unexpected include billionaires Bill Gates and Peter G. Peterson; former Goldman Sachs chairman John Whitehead, and former chairman of the Federal Reserve Paul Volcker. Conservative political leaders behind it include German chancellor Angela Merkel and French president Nicolas Sarkozy. Experts promoting it include Nobel Laureates Joseph Stiglitz and Paul Krugman. Moral leaders advocating for it include Archbishop of Canterbury Rowan Williams and the Pontifical Council for Justice and Peace.
Here's what Archbishop Williams wrote in support of imposing the levy:
"There is still a powerful sense around - fair or not - of a whole society paying for the errors and irresponsibility of bankers; of messages not getting through; of impatience with a return to "business as usual" represented by still soaring bonuses and little visible change in banking practices."
The European Commission recommended in September that the 27 European Union member countries adopt a .1 percent tax on financial transactions beginning in 2014. It estimated that the tax would raise $78 billion a year. Europe hesitates to institute the tax without a similar levy in the United States.
Earlier this month, two U.S. lawmakers who have long supported the levy introduced legislation to impose a smaller tax -- .03 percent or 3 cents on $100 in transactions. The tax proposed by U.S. Rep. Peter DeFazio, D-Ore, and Sen. Tom Harkin, D-Iowa, would raise about $350 billion over a decade.
Here's what Sen. Harkin said about it:
"I think it's fair. I think it's just. I think it's a reasonable way of raising revenue."
That's the gist of it. It's fair. Wall Street caused the crash. It caused devastating unemployment. It exacerbated deficit problems in the United States, Greece, Ireland, Portugal, Spain and Italy. If the market hadn't crashed, sustained higher tax revenues would have prevented these difficulties from intensifying.
Now, in countries worldwide, including the United States, conservatives are demanding austerity to deal with deficits. They refuse to ask financial speculators to help pay for the trouble they caused. Instead, these conservatives demand that the middle class and the poor foot the bill. American conservatives insist the middle class lose Social Security benefits, accept Medicare and Medicaid cuts, subsist with fewer teachers, firefighters and police officers.
The 99 percent have sent a pretty clear message, however, that they're fed up and they're not going to take unshared sacrifice anymore.
They told Bank of America where it could put its proposed monthly fee on debit cards. They told Ohio governor John Kasich where he and fellow conservatives could put their law denying public workers the right to collectively bargain for a better life. And in parks across America and around the world, the 99 percent are telling the 1 percent where they can put their demand that sacrifice be suffered only by the 99 percent.
The crash tax is, essentially, a sales tax on financial transactions. The middle class pays sales tax on all the stuff it purchases. There should be no special exceptions. The 1 percent should be paying sales tax on the purchase of risky derivatives and on bets that derivatives will fail. This is equity. This is simple fairness.
Some call this levy a Robin Hood tax. But that's not right. This is not robbing the rich to give to the poor. This is charging the 1 percent a just share.
This is holding speculators accountable. This is individual responsibility, the concept the GOP claims to love. Wall Street bombed the world economy. Now it's obligated to participate in financing recovery, to pay reparations to Main Street.
Follow Leo W. Gerard on Twitter: www.twitter.com/uswblogger
The European Commission recommended in September that the 27 European Union member countries adopt a .1 percent tax on financial transactions beginning in 2014. It estimated that the tax would raise $78 billion a year. Europe hesitates to institute the tax without a similar levy in the United States.
1) The government created the Community Reinvestment Act under Jimmy Carter and expanded it under Bill Clinton to force large banks to make low down payment housing loans to low income people with poor credit ratings.
2) Fannie Mae was required by the government to support mortgages to those with poor credit by easing the credit requirements on loans that it purchased from the banks. Obviously, this encouraged all banks to make more subprime loans.
3) People who were unlikely to be able to pay mortgages applied and got low downpayment mortgages because of the lowered credit requirement.
4) The banks were sued by the government and others if they did not meet the requirements to make the low interest/down payment loans to those with poor credit.
5) The mortgage derviative market was created which allowed banks to market the risky loans that the government had forced them to make.
6) The govenment kept other interest rates low to encouraged those who saved to invest in the mortgage derivative market.
7) The predictable crash then happened as soon as the economy faltered and housing prices started to fall.
It was because of pressure from wall street to create as many of those mortgage backed securites as possible that resulted in these absurd underwriting standards. They couldn't get enough of them. So a private company in california led the way*. They securitized the loans and sold them to wall street. Later Fannie and Freddie also got more lenient.
But the poor are a convenient excuse. Hey, don't look at wall street. Nothing going on over here!
*House of Cards, CNBC, by David Faber
The point of the article was that all of Wall Street was entirely responsible for the crash and nobody else. I think that Fannie, Freddie, the government, and home owners - who the article held blameless - deserve a large amount of the blame. It also does not help that homeowners who are capable of paying the mortgages are allowed to walk away when their mortgages are underwater. Obviously, the banks and those that created, insured, and sold high risk mortgage backed securities also deserve a significant amount of blame. However, I would not assign blame to the rest of Wall Street.
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If this tax is enacted it would certainly provide desperately needed revenue. Unfortunately, it would also wed the mega-banks and government to an even greater extent. Ominously, this even greater interconnectiveness may make it all the more difficult to ban what needs to be banned, regulate what needs to be regulated and most importantly -- free up what needs to be free.
Now, on any given day, 70% of trades are of the high frequency "black box" variety and this trading is dominated by the "Too Big To Fails." What if this small tax doesn't, in fact, mitigate the effects of high frequency trading? What if this grossly unfair trading continues unabated, only now with a government impramatur? What if the state becomes so reliant on the revenue stream from this tax that it actually preserves, promotes and protects the interests of the large volume traders to an even greater extent? How will we ever end this anti-capitalistic distortion that is certainly skewing so much activity away from the synergistic ideal of Wall Street/ Main Street investment in American prosperity?
We need to restore fairness in trading, stop the gambling, and get "the remaining good actors" on Wall Street back to investing in "Main Street" America. The "gordian knot" that links our government and "The Too Big To Fails" must be cut -- unfortunately this tempting tax (however well intentioned) may only tighten it.
Quick article that points to the potential unintended consequences of tax policy:
http://www.nationalreview.com/agenda/39019/oregon-lottery-profits-fall-so-state-cuts-gambling-addiction-programs/josh-barro
Naked Credit Default Swaps Must Be Banned...The Ties That Bind "Too Big To Fail"
Outstanding "60 Minutes" "Credit Default Swaps"
http://www.cbsnews.com/video/watch/?id=4546583n
"Black Box Trading: The Real Hazard to the Markets"
http://www.guardian.co.uk/business/2011/aug/14/black-box-trading-hazard-markets
"The 29 Global Banks That Are Too Big To Fail"
http://www.forbes.com/sites/afontevecchia/2011/11/04/the-worlds-29-most-systemically-important-banks/
the corrupt pharmaceutical industry policy is a huuge hit on the middle class.
unlimited license to pollute and runaway toxic waste is one of the main drivers of the health care problems and expenses that plague Americans etc
etc
Life expediency has never been greater.
P.S. If you don't like the pharmaceutical industry, feel free to not buy any of their medicines. Or if you don't want to be so radical, only buy generics.