A global bank tax

British Prime Minister Gordon Brown is convinced that the major nations of the world will soon agree to take a pound of flesh from the banks -- a financial tax that spans the globe. What are the odds the US goes along?

First, let's read what Brown said to The Financial Times:

Mr Brown believes that opinion has shifted decisively in favour of a globally co-ordinated tax after President Barack Obama's move last month to raise $90bn from a US bank levy.

The tax could cost the financial services sector tens of billions of pounds a year.

That's money, not flesh. Brown believes the G20 group of countries will approve a global bank tax at its June meeting. He says the International Monetary Fund will probably endorse the idea at its April meeting in Washington:

He thought the IMF would propose a method that would be "somewhat different" from the tax on wholesale funding proposed by Mr Obama...

Mr Brown insisted he was not attacking banks or their wealthy employees for ideological reasons.

He's attacking them for liability reasons. He believes a properly-targeted tax will encourage banks to take fewer risks. The money collected might also be used to refund taxpayers for previous bailouts or set aside for future bank rescues (perish the thought).

At first blush, a global financial tax doesn't sound like a bad idea. American banks have argued that efforts to cut them down in size will hurt their ability to compete internationally. A global tax might level the playing field.

Of course, that is most likely a ridiculous case of wishful thinking. Not only are taxes such as this notoriously inefficient on a domestic level, how would it be enforced on a global scale? Would it replace domestic efforts such as President Obama's proposed tax? Or would it be another layer of taxation on top of national bank levies?

South Korea has already made up its mind. Here's what a top financial official said today:

"We pursue an open market economy, so our basic stance is not to have such things," he said with a hint of irony, after briefing reporters about the role of the Korean government in the Financial Stability Board (FSB), Thursday. "Our banks and bank holding companies are watched very closely by the government. Every nation has its own circumstances, so we don't need to follow every rule drawn up by developed nations."

The US Congress isn't likely to go along with it either says 24/7 Wall Street :

Brown underestimates the fight that US financial firms are prepared to make against a tax and the fairly good chance that Congress will turn such a program down. Banks may argue that a tax would cut into their profits. The by-products of that are lower shareholder returns and less money available to make loans to consumers and businesses.

The Brown initiative is probably doomed because it runs against the efforts of the American government to encourage banks to increase the amount of liquidity in the market. Congress can always forbid or restrict risky proprietary trading at banks that take deposits. It does not need to levy a tax to carry out that goal.

In other words, the global tax has a snowball's chance in Washington of passing.

A snowball in July, I mean.

Your thoughts?

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It seems to me that most of what I've heard about financial reform has been, "The banks won't like it." "They'll get congress to not do it." "We couldn't disadvantage our finacial institutions aginst those of other countries'."

All of this may on one level have validity, but it is all ignoring the main point:

If it weren't for the largess of my tax dollars and that of my children's (future tax dollars), those <bleep>ers would have ruined us.
I don't care how Free Market you are, this was not a Free Market safety net.

Once you've fallen off the high wire and used the net to survive, getting back to the wire is a long, arduous task of climbing the ladder back up.
There's no elevator or teleport to get back up there (like these guys seem to have manufactured).

Just remember the Golden Rule. The Banker with the Gold makes the Rules.

How would you collect the tax. There is no worldwide authority that could enforce. The local governments would skim off the top or keep it. The UN can not even collect all the dues if a country does not pay. The only reason taxes are paid anywhere is if enforcement works.

The econonmy is SO bad, even the banks can't buy preferential treatment anymore.

What happened to our "new world order"?

<b>Can Obama help Canada?</b>

President Obama recently called for a Financial Crisis Responsibility Fee.

European Union President Herman van Rompuy also thought the idea of an international levy on banks is a good one. The problem is Canadian government opposition to global bank tax on transactions and services can block it. As co-chairman of the G-20, Canadian Prime Minister Stephen Harper has plenty of places to do damage. Can Obama show Harper what humanism is before Canada wins an other monster of the day prize?

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