[Peace-discuss] "Banks own the US government", by Dean Baker [and Peter DeFazio's proposal for an oil-speculation tax]

[E. Wayne Johnson]

I dont understand Durbin.  Or maybe I do.

He voted for all of the bailouts, and banks account for about $700,000 
in campaign
money he has received.

*

Dean Baker is mostly correct IMHO, but I think he underestimates the 
size of the problem somewhat.

*

Max Keiser's interview of Paul Craig Roberts is interesting
http://www.liberty4urbana.com/drupal-6.8/node/299




On 7/6/2009 11:19 AM, Stuart Levy wrote:
> [Dean Baker's article from The Guardian,
> passed along by Beverly Walters of the ICJPE]
>
>      Banks own the US government
>
> There are smart ways to raise money and regulate the market,
> but Wall Street is working to kill any meaningful financial reform
>
> http://www.guardian.co.uk/commentisfree/cifamerica/2009/jun/30/congress-financial-reform-banks
> By Dean Baker
> Tuesday, June 30, 2009
>
>
> Last month, when the US Congress failed to pass a bankruptcy reform measure
> that would have allowed home mortgages to be modified in bankruptcy,
> senator Dick Durbin succinctly commented: "The banks own the place."
>
> That seems pretty clear.
> After all, it was the banks' greed that fed the housing bubble with loony
> loans that were guaranteed to go bad. Of course the finance guys also made a
> fortune guaranteeing the loans that were guaranteed to go bad (ie AIG ), and
> when everything went bust, the taxpayers got handed the bill. The cost of
> the bailout will certainly be in the hundreds of billions, if not more than
> $1tn when it is all over.
>
> More importantly, we are looking at the most severe economic downturn since
> the Great Depression. The cumulative lost output over the years 2008-2012
> will almost certainly exceed $5tn. That comes to more than $60,000 for an
> average family of four. This is the price that we are paying for the bankers'
> greed, coupled with incredible incompetence and/or corruption from our
> regulators.
>
> Under these circumstances, it would be reasonable to think that the bankers
> would be keeping a low profile for a while. That's not the way it works in
> Washington. The banks are aggressively pushing their case in Congress and
> Obama administration . Not only are we not going to see bankruptcy reform, but
> any financial reform package that gets through Congress will probably
> contain enough loopholes that it will be almost useless.
>
> In this political environment, the poor might get empathy, but Wall Street
> gets money, and lots of it. Even when the issue is global warming Wall
> Street has its hand out. The fees on trading carbon permits could run into the
> hundreds of billions of dollars in coming decades. A simple carbon tax would
> have been far more efficient, but efficiency is not the most important value
> when it comes to making Wall Street richer.
>
> This is why it was so encouraging to see congressman Peter DeFazio's
> proposal to tax trades in oil options and futures. DeFazio proposed a tax of 0.02%
> on trades in oil futures and options as a way to make up a shortfall in the
> federal government's highway trust fund. This tax could raise billions of
> dollars each year in revenue and make speculation in the oil market a more
> dangerous affair.
>
> The logic is very simple. For someone using these markets to hedge, the tax
> will be inconsequential. For example, a farmer that hedges a $400,000 wheat
> crop will pay $80 when selling a future. Similarly, airlines that hedge by
> buying oil futures will barely notice the higher cost. In fact, because
> trading costs have fallen so much in recent decades, a tax at this level would
> just be raising costs back to their levels of two decades ago, a point at
> which there was already a very vibrant futures and options market.
>
> However, even a modest tax will make life much more difficult for
> speculators. Many of them expect to make quick short-term gains, often buying and
> selling the same day. For these traders, an increase in transactions costs of
> 0.02% would be a burden.
>
> Of course, a modest tax will not drive the speculators out of the market
> altogether, it is just likely to reduce the volume of speculation. For this
> reason, even a modest tax can still raise an enormous amount of money in a
> market where tens of trillions of dollars of derivatives changes hands each
> year.
>
> This tax can best be thought of as a tax on gambling. Gambling is heavily
> taxed in every state that allows it. DeFazio's bill is effectively a tax on
> gambling in the oil markets. It will not stop it, but it would discourage it,
> and in the process raise a huge amount of money that could go to productive
> purposes.
>
> The bill faces an enormous uphill struggle in Congress. As Durbin said, the
> banks own the place, and they are not going to just step aside and let
> Congress impose a tax on such a lucrative business. But, it is important that
> people know about the DeFazio bill.  First, DeFazio deserves a place on the
> honour roll for standing up to Wall Street.
>
> Also, it is important for the public to know that there is a relatively
> low-cost way to make up the shortfall in the highway trust fund.  When Congress
> raises some other tax and/or cuts a useful programme, people should know
> that there was a better alternative.  It just didn't happen because, as we know,
> the banks own the place.
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