[Peace-discuss] What to do with the banks

[C. G. Estabrook]

"From now on, we must insist that the banks cease to be in the hands  
of private interests."

Tobin isn’t enough now
by Serge Halimi

Fifteen years ago, Le Monde diplomatique first mentioned a tax on  
financial transactions (1). At the time, the value of these  
transactions was 15 times the entire world’s gross annual product.  
Today, it is almost 70 times. Back then we had barely heard of  
subprime loans and no one imagined there could be a sovereign debt  
crisis in Europe. Most European socialists, under the spell of Tony  
Blair, were all for “financial innovation”. In the United States, Bill  
Clinton was about to encourage deposit banks to speculate with their  
clients’ money. And in France, Nicolas Sarkozy, besotted with the  
American model, was praising the (potentially ruinous) policy pursued  
by the Federal Reserve (2) and dreaming of French-style subprime loans.

Almost no one in power backed a Tobin tax in 1997: everything was  
going so well. The then French finance minister, Dominique Strauss- 
Kahn, thought it would not work. Sarkozy was even more incisive: “The  
Tobin tax business is absurd … We will encourage the creation of  
wealth in other countries if we penalise it here” (3). As soon as he  
became president, he instructed his finance minister, Christine  
Lagarde (now head of the International Monetary Fund), to cancel a tax  
on stock exchange transactions. She explained that “this measure will  
make Paris more attractive as a financial centre” and she warned that  
if it was not cancelled, “deals will be made in foreign centres where  
taxes of this kind have long since been abolished” (4).

It is now clear that policymakers were irresponsible when they  
expected to make the most of “financial innovation” that grew from tax  
dumping. The state rescued the banks and asked them in return only to  
make even fatter profits for themselves. But no decisions were taken  
on financial control; there were just more grumbles about “money  
ruling the world”. In the US, even ultra-conservative Republican  
candidates now criticise Wall Street “vultures” who “come in, take all  
the money out of your company, and then leave you bankrupt while they  
go off with millions” (5).

So it is no surprise that, four months before the end of his  
presidential term, Sarkozy now claims “the financial institutions  
should be made to help repair the damage they caused”. No more talk  
about the “absurdity” of a tax on financial transactions, or the  
danger that the goose — speculation — might lay its golden eggs in  
some other country.

We could still be content to “throw some sand in the wheels of our  
excessively efficient money markets,” as economist James Tobin  
recommended long ago. But since these markets clearly represent an  
essential public asset whose shareholders have the ability to take  
countries hostage, we should do more. From now on, we must insist that  
the banks cease to be in the hands of private interests.

_____________________
(1) See Ibrahim Warde, “The tax which speculators love to hate” and  
Ignacio Ramonet, “Disarming the markets ”, Le Monde diplomatique,  
English edition, February 1997 and December 1997 respectively.

(2) “If I was to take anyone as a model, it would be Alan Greenspan,”  
he explained in an interview published in Les Echos, Paris, on 23 June  
2004. “He has always acted with pragmatism and humility.”

(3) France 2, 7 June 1999.

(4) Speaking in a debate in the French Senate, 23 November 2007.

(5) Newt Gingrich, Today Show, NBC, 9 January 2012.
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