Not everybody in the financial industry is like Jamie Dimon. They do not all think the financial system is running like a charm, aside from a few "isolated incidents" like a $2 billion trading loss.
No, it's important to remember that the financial industry is not monolithic. I was reminded of this over the past couple weeks as I worked to persuade financial professionals to come out in support of small taxes on trades of stocks, bonds, and derivatives.
It's an idea that tends to cause hyperventilation among true believers in unfettered financial markets. My favorite over-the-top reaction so far: former UK Prime Minister John Major comparing a proposed European financial transaction tax of 0.1% on stock trades and 0.01% on derivatives to a "heat-seeking missile" aimed at the City of London (the UK's Wall Street). Major's party, currently led by Prime Minister David Cameron, receives more than half of its donations from the financial sector.
But it turns out it's not that hard to sell the idea to people from the financial world who still care about helping companies raise capital to innovate and create jobs. That's because the tax would apply to each trade, so even at a small fraction of a percent, it would discourage the high-speed, speculative trading that now dominates the markets. And it would encourage longer-term, productive investment.
With just a couple week's work, a little international team managed to persuade 52 financial professionals to break rank with their industry peers and come out in support of such taxes.
In a joint letter addressed to G20 and European leaders, they wrote "These taxes will rebalance financial markets away from a short-term trading mentality that has contributed to instability in our financial markets." The letter also notes the potential to raise "massive revenues for people in urgent need at home and in the world's poorest countries."
It's an encouraging start towards the goal of building up a counterweight to the dominant Wall Street perspective. And it's come together at a critical moment in the international debate.
Here in the United States, we're seeing a surge of grassroots support for these taxes. Check out the new web site robinhoodtax.org. It's full of fun videos, resources, and ways that anybody can get involved in the campaign.
But the real policy momentum right now is in Europe. The European Commission proposed legislation for an EU-wide financial transaction tax last fall. This got bogged down by resistance from a few of the 27 EU member governments, including the hyperventilators in the UK. But recently Germany and France have announced they're prepared to move ahead with a coalition of the willing, an approach that should be achievable in the near term.
With Europe moving closer to an agreement on financial transactions taxes, the industry lobby's efforts to block it will most certainly intensify. But having financial professionals on the right side of this issue will go a long way towards blunting the backlash.
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