PSI blog on the Financial Crisis

Introduce a financial transaction tax for people and the planet now!

We believe it is time to turn a crisis for the banks into an opportunity for the world. We believe it is time for action in the interest of people and the planet. Sign the petition and tell your friends and family about the campaign!

A global electronic petition in favour of the financial transactions tax addressed to G20 leaders is currently underway. Many trade unionists in different countries have signed on. PSI is supporting the campaign and encourages all affiliates to sign the petition. The petition can be accessed in 12 languages and signed through the following web site: http://www.makefinancework.org

Global action alert

Challenge the IMF to Report the Truth: a New Financial Transactions Tax for Domestic and Global Needs is Feasible, and Urgently Needed

Several civil society organizations have prepared a "Global Action Alert" with the aim of getting the IMF to give serious consideration to the proposed financial transactions tax. The recommendation that organizations contact their government's representative at the IMF is similar to a suggestion the ITUC made to affiliates in a circular letter earlier this month that they urge their government to pressure the IMF to support the FTT. The ITUC/Global Unions are scheduled to hold a consultation meeting with the IMF on the FTT in the second week of February.

Download the document here: Download Global_action_alert

Responses to Criticisms of Taxes on Financial Speculation

Although the national debate on financial transactions taxes (FTT) has just begun, there have been a wide range of responses arguing that the tax is either undesirable or unenforceable, or both. The Center for Economic and Policy Research has prepared a paper presenting a brief response to these criticisms.

Click here to access the paper on the CEPR website.

Downing Street seminar should back a financial transactions tax

As representatives from the G7 group of nations, the World Bank and the IMF meet at a Downing Street seminar on Monday 25 January, the TUC is calling on those gathered to consider a financial transactions tax.

The seminar, which is due to be chaired by Lord Myners, has been called to consider how best to protect taxpayers from the costs of bailing out the banks.

TUC General Secretary Brendan Barber said:

'This debate must look further than just the direct costs of bailing out the banks either during the financial crash or any future crisis. The costs of the recession go far wider - both to taxpayers and the millions who have lost their jobs or livelihoods as a result of this finance driven downturn.

'A financial transactions tax must be at the top of the agenda for today's seminar. This is by far the best way to raise serious money from the finance sector, not just to make good the damage they have already done, but to stop future deep cuts in spending both in the UK and elsewhere.'

The TUC News release can be accessed on the TUC website here.

Obama Weighs Tax on Banks to Cut Deficit

President Obama is likely to propose a fee on financial institutions to help reduce the federal deficit when he releases his budget plans in February, although the details remain unresolved, according to administration officials.

President Obama will try to recoup for taxpayers as much as $120 billion of the money spent to bail out the financial system, most likely through a tax on large banks, administration and Congressional officials said Monday.

The general idea is to devise a levy that would help reduce the budget deficit, which is now at a level not seen since World War II, and would also discourage the kinds of excessive risk-taking among financial institutions that led to a near collapse of Wall Street in 2008, the officials said.

But the president also has a political purpose — to respond to the anger building across the country as big banks, having been rescued by the taxpayers, report record profits and begin paying out huge bonuses while millions of Americans remain out of work.

The administration previously rejected two ideas that have received much attention in recent months: a transaction tax on financial trades and a special tax on executives’ bonuses.

The most likely alternatives would be a tax based on the size and riskiness of an institution’s loans and other financial holdings, or a tax on profits.

Lobbyists for bankers, taken by surprise, immediately objected to any new tax. They said financial institutions had been repaying their portion of the bailout money in full, with interest.

Full article on the New York Times here.

The Poor Should Not Pay the Price for the Crisis

In the December 2009 issue of the quarterly magazine, Finance & Development, published by the International Monetary Fund, Barbara Stocking of Oxfam makes a forceful case for stepping up to help the most vulnerable around the world hit by the economic and financial crisis.

The economic crisis forces us to confront chronic vulnerability and damaging inequality, writes Stocking. A crucial aspect, for Oxfam, is that the impact is most catastrophic for those at the margins. People living at or under the poverty line, without a safety net, are the most vulnerable. This is especially true of women, who make up the majority of the world’s poor. Stocking questions what what the financial world can do to pay for the damage inflicted.

The full “Straight Talk” column can be accessed here.

Speculation Tax could Raise Billions in Revenue

 

A new working paper from CEPR and the Political Economy Research Institute analyzes the potential revenue from a financial transactions tax across a range of financial assets. The authors find that such a tax could generate $177 to $354 billion for the U.S. government. In addition to using this revenue to fund a jobs program and/or as a route to long-term deficit reduction, a financial transactions tax could also curb speculation in our bloated financial system.
 
Click here to access CEPR's press release.

The three page report can be accessed here.

Wall St tax has "great deal of merit"

A proposed tax on financial transactions "has a great deal of merit" and would help raise much-needed revenue for the U.S. government, House of Representatives Speaker Nancy Pelosi said as other backers touted it as a measure to slash Wall Street salaries.

"It is really a source of revenue that has really minimal impact on the transaction but a tremendous impact on helping us meet our needs," Pelosi said at a news conference.

Read the full article from Reuters here.

Economists' Letter in Support of a Financial Transactions Tax

 
Over 200 economists, including Nobel Laureate Daniel McFadden, James K. Galbraith, and Dean Baker, have signed this letter in support of a modest set of financial transaction taxes, which could raise a substantial amount of needed revenue while having little impact on trades that have a positive economic impact.

The cost of trading financial assets has plummeted over the last three decades as a result of computerization. This has led to an enormous explosion in trading volume, with most trades having little economic or social value and redistributing disproportionate resources to the financial sector. A set of modest financial transactions taxes, which would just raise trading costs back to the level of two or three decades ago, would have very limited impact on trades that have real economic value.

Such taxes could both reduce the volume of speculation in financial markets and provide substantial revenue for either important public purposes and/or deficit reduction. Financial transactions taxes could be an important part of a reform package that seeks to remake the financial sector so that it better serves the larger economy.

Click here to access the letter.

Taxing the Speculators

Should we use taxes to deter financial speculation? Yes, say top British officials, who oversee the City of London, one of the world’s two great banking centers. Other European governments agree — and they’re right. Unfortunately, United States officials — especially Timothy Geithner, the Treasury secretary — are dead set against the proposal. Let’s hope they reconsider: a financial transactions tax is an idea whose time has come.

Click here to access the article from the New York Times written by Paul Krugman.