IMF proposes two big new bank taxes to fund bail-outs

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Banks and other financial institutions face paying two new taxes to fund future bail-outs, the BBC has learned.

 

Business editor Robert Peston said the global proposals by the International Monetary Fund (IMF) were "more radical" than most had anticipated.

 

All institutions would pay a bank levy - initially at a flat-rate - and also face a further tax on profits and pay.

 

The measures are designed to make banks pay for the costs of future financial and economic rescue packages.

 

The IMF documents were made available to governments of the G20 group of nations on Tuesday afternoon and seen by the BBC soon afterwards. The plans will be discussed by finance ministers this weekend.

 

"The proposals are likely to horrify banks, especially the proposed tax on pay," our business editor said.

 

"They will also be politically explosive both domestically and internationally."

 

Insurers, hedge funds and other financial institutions must also pay the taxes, the IMF argues, despite them being less implicated in the recent crisis.

 

If they were not included, activities currently carried out by banks would be reclassified as, for example, insurance or hedge-fund services to escape the levies.

 

While the general levy, or "financial stability contribution", would initially be at a flat rate, this would eventually be refined so that riskier businesses paid more.

 

British chancellor Alistair Darling said the IMF's proposals were "important" and should be welcomed.

 

"The recognition that banks should make a contribution to the society in which they operate is right," he said.

 

It was agreed at the G20 summit in London last year that financial institutions and not tax-payers should pay for future bank rescue packages.

 

Since then several proposals have been put forward by various governments including the so-called "Tobin Tax" on financial transactions. Some nations, including Canada, oppose any new bank taxes.

 

However no country has yet introduced taxes to pay for future bailouts - arguing that unless the rules were brought in on a coordinated basis, institutions would simply "cherry pick" where they operated, moving to jurisdictions with less tough financial regulation.

 

The body which represents banks in the UK, the British Banking Association said it was concerned about any move which would place the UK industry "at a competitive disadvantage internationally".

 

"We also need to see all the detail of what is proposed - and how any new levy and tax would apply - to determine the effect it would have", it said.

 

In the light of the UK's looming general election, the IMF proposals were likely to be used for some political point-scoring, our business editor said.

 

"Labour is bound to claim that the IMF is implicitly criticising the Tories' plan to impose a new tax on banks irrespective of what other countries do - because the IMF paper says that 'international co-operation would be beneficial'.

 

"I would also start to question my sanity if Gordon Brown doesn't claim credit for putting pressure on the IMF to launch its review of possible bank taxes."

 

But he added that the Conservatives would say that their bank tax proposals resembled the financial stability contribution.

 

And the Liberal Democrats would claim that their proposed tax on banks' profits was similar to the second tranche of the IMF proposal.

 

http://news.bbc.co.uk/1/hi/business/8633455.stm

 

A good move towards ensuring the next crisis isn't as bad without going so far as to punish any of the corporations that caused the recent one......except in terms of the stock prices which are bound to tumble with this news....and again if/when it's put into action.

 

Glad it's come up during the election when all the parties will have to go on the record in support to curry favour with the electorate, basically neutralises the lobbyists for a few weeks.

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Let's have it!!

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Good to see they've shown sufficient insight to prevent banks splitting up and re-inventing themselves as non-banks, but doing the same activities. Sadly this will never was in the US.

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Sadly this will never was in the US.

 

 

[Matt 0]

*wash!

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Don’t Cry for Wall Street

 

On Thursday, President Obama went to Manhattan, where he urged an audience drawn largely from Wall Street to back financial reform. “I believe,” he declared, “that these reforms are, in the end, not only in the best interest of our country, but in the best interest of the financial sector.”

 

Well, I wish he hadn’t said that — and not just because he really needs, as a political matter, to take a populist stance, to put some public distance between himself and the bankers. The fact is that Mr. Obama should be trying to do what’s right for the country — full stop. If doing so hurts the bankers, that’s O.K.

 

More than that, reform actually should hurt the bankers. A growing body of analysis suggests that an oversized financial industry is hurting the broader economy. Shrinking that oversized industry won’t make Wall Street happy, but what’s bad for Wall Street would be good for America.

 

Now, the reforms currently on the table — which I support — might end up being good for the financial industry as well as for the rest of us. But that’s because they only deal with part of the problem: they would make finance safer, but they might not make it smaller.

 

What’s the matter with finance? Start with the fact that the modern financial industry generates huge profits and paychecks, yet delivers few tangible benefits.

 

Remember the 1987 movie “Wall Street,” in which Gordon Gekko declared: Greed is good? By today’s standards, Gekko was a piker. In the years leading up to the 2008 crisis, the financial industry accounted for a third of total domestic profits — about twice its share two decades earlier.

 

These profits were justified, we were told, because the industry was doing great things for the economy. It was channeling capital to productive uses; it was spreading risk; it was enhancing financial stability. None of those were true. Capital was channeled not to job-creating innovators, but into an unsustainable housing bubble; risk was concentrated, not spread; and when the housing bubble burst, the supposedly stable financial system imploded, with the worst global slump since the Great Depression as collateral damage.

 

So why were bankers raking it in? My take, reflecting the efforts of financial economists to make sense of the catastrophe, is that it was mainly about gambling with other people’s money. The financial industry took big, risky bets with borrowed funds — bets that paid high returns until they went bad — but was able to borrow cheaply because investors didn’t understand how fragile the industry was.

 

And what about the much-touted benefits of financial innovation? I’m with the economists Andrei Shleifer and Robert Vishny, who argue in a recent paper that a lot of that innovation was about creating the illusion of safety, providing investors with “false substitutes” for old-fashioned assets like bank deposits. Eventually the illusion failed — and the result was a disastrous financial crisis.

 

In his Thursday speech, by the way, Mr. Obama insisted — twice — that financial reform won’t stifle innovation. Too bad.

 

And here’s the thing: after taking a big hit in the immediate aftermath of the crisis, financial-industry profits are soaring again. It seems all too likely that the industry will soon go back to playing the same games that got us into this mess in the first place.

 

So what should be done? As I said, I support the reform proposals of the Obama administration and its Congressional allies. Among other things, it would be a shame to see the antireform campaign by Republican leaders — a campaign marked by breathtaking dishonesty and hypocrisy — succeed.

 

But these reforms should be only the first step. We also need to cut finance down to size. (As Nick Clegg is saying and being derided by the main parties for).

 

And it’s not just critical outsiders saying this (not that there’s anything wrong with critical outsiders, who have been much more right than supposedly knowledgeable insiders; see Greenspan, Alan). An intriguing proposal is about to be unveiled from, of all places, the International Monetary Fund. In a leaked paper prepared for a meeting this weekend, the fund calls for a Financial Activity Tax — yes, FAT — levied on financial-industry profits and remuneration.

 

Such a tax, the fund argues, could “mitigate excessive risk-taking.” It could also “tend to reduce the size of the financial sector,” which the fund presents as a good thing.

 

Now, the I.M.F. proposal is actually quite mild. Nonetheless, if it moves toward reality, Wall Street will howl.

 

But the fact is that we’ve been devoting far too large a share of our wealth, far too much of the nation’s talent, to the business of devising and peddling complex financial schemes — schemes that have a tendency to blow up the economy. Ending this state of affairs will hurt the financial industry. So?

 

http://www.nytimes.com/2010/04/23/opinion/...=NytimesKrugman

[Park Life 71]

It's quite the fallacy that this sector enhances economies, a lot of the wealth is fictitious or at best on rated paper and rarely trickles down into real main street scenarios. The best thing about this cirisis is that a lot o fat old cunts living in Miami lost their life savings (through chasing ubelieavable returns and pure greed).

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