EU pushes for Tobin Tax

Discussion in 'Politics, Religion, Social Issues' started by takao, Dec 11, 2009.

  1. takao macrumors 68040

    takao

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  2. stubeeef macrumors 68030

    stubeeef

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    #2
    Is there a tax the left doesn't like? There must be, seriously.:confused:
     
  3. Thomas Veil macrumors 68020

    Thomas Veil

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    #3
    You might well ask if there's a bonus for failure that the right doesn't like.

    I don't see anything wrong with using taxes as a means of discouraging risky banking behavior.
     
  4. takao thread starter macrumors 68040

    takao

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    #4
    so the EU is now "the left" for you ? berlusconi, merkel, sarkozy etc. ?
    that even the Uk with it's big financial market backs this decision is a breakthrough

    such a transaction tax could have actually an impact on stock markets and turn them into less of a casino and would force investors to make long time investments instead of jumping aboard every train and off again
     
  5. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #5
    I don't understand, they talk about bank transactions in the header, but then the only tax they talk about in the body is taxing executive bonuses. Is this a tax on all bank transactions? If so you can take this one back where it came from. The last thing we need is more deadweight loss from taxes, we are trying to pull our economy out of the meat grinder not put it back in.
     
  6. rhsgolfer33 macrumors 6502a

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    #6
    You really think so? You think banks are suddenly going to stop taking risks because of a small tax on each transaction? Give me a break. Banks will still take risks because the possibility to make extreme profits is still there. Unless you are going to start taxing bank transactions at some astronomical rate, which won't happen because of the economic effects of effectively halting one of the banks largest income sources, you are not going to see much of a change in risk taking.

    Plus, there are ways to recoup the revenue lost to taxes. For instance, raising fees investors are charged or taking more risks with more money in order to keep profits in line with the market's expectations.

    If we really want to insure that banks will remain solvent, we should require increased liquidity not impose some silly tax under the guise of decreasing bank risk taking when all it is really for is funding government programs. I really don't have a problem with a transaction tax imposed at a low rate to fund something like Medicare or Social Security, but don't feed me ******** about decreasing risk taking in banks in order to draw up public support for the tax.
     
  7. Cave Man macrumors 604

    Cave Man

    #7
    Taxes for tokin'? I'm glad they're finally getting some revenue from marijuana.
     
  8. takao thread starter macrumors 68040

    takao

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    #8
    the rate in question is estimated about 0.01% to 0.05%

    it's not the size of the investment which counts er the return of investment but the frequency of how often you jump around with your big money (as it is done in the daily currency betting game)

    and those going overboard with fees will lose customers

    well the current game of "privatize profits and nationalize losses" as it's currently seems to run in the business world isn't going to continue i can assure you that
    if tax payers have to pay when banks have problems they also deserve their payback when it's on the upswing
     
  9. rhsgolfer33 macrumors 6502a

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    #9
    If you do 100 $100,000,000 transactions you pay $1,000,000 in tax assuming the .01% rate. If I do 1 $10 billion transaction I pay $1,000,000 in tax. Is that enough to make banks decrease risk taking? No way. Not when you could make several times that on one transactions alone. And the size of the investment certainly does count. If I make a large investment I will pay more tax that someone who makes a small one. Of course number of transactions does play into it, as illustrated by the fact that 100 smaller transactions can add to a total tax the same as one large one. If we solely wanted to "tax" people on number of transactions, we would charge flat dollar amount on each transaction.

    That assumes that the vast majority of banks won't raise fees. I think we would probably see a fairly uniform response at investment banks and regular banks with increased fees in response to a tax like this.



    In the business world? You mean at a select few banks and companies. I would hardly judge the entire business world based on the actions of a few companies. They will get their payback, probably not from GM or AIG, but some of the largest banks will undoubtedly payback the money they directly received from the government under TARP.

    http://www.npr.org/blogs/money/2009/12/morning_report_citi_expected_t.html

    http://newsroom.bankofamerica.com/index.php?s=43&item=8583

    http://www.marketwatch.com/story/jp-morgan-goldman-sachs-other-banks-repay-tarp
     
  10. itcheroni macrumors 6502a

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    #10
    It is a myth that less liquidity, i.e. less transactions (i.e. less speculators/traders), leads to more stability. It actually has the opposite effect. Less liquidity always lead to more volatility.

    A few notes on those repayments.

    1) those entities are so focused on repaying TARP because they don't want pay restrictions. This action is a consequence of government interaction.

    2) how are they able to pay back so soon? Since the first quarter of this year, they have no had to mark their assets to market value. All the losses that were sending them to bankruptcy at the end of 2008, are now accounted at whatever value the banks would like-usually the expected profit they estimated when they make those loans. No fundamental changes or profits have taken place. It is a mere accounting change from reality to fantasy that allows them to have a book balance that will allow them to pay back the TARP. Most of the bank failures have found the banks to have about significantly less equities than everyone thought. If the banks currently paying back the TARP had to mark to market, they would all have to file for bankruptcy.

    3) how are they able to finance this repayment? They are issuing stocks. This punishes the original stockholders of these companies.
     
  11. OriginalFormula macrumors regular

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    #11
    Good point. Why try to prevent another financial meltdown? Where's the fun in that?
     
  12. Eraserhead macrumors G4

    Eraserhead

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    #12
    What's wrong with that? Who else should pay?
     
  13. rhsgolfer33 macrumors 6502a

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    #13
    I believe what you are talking about is the FSP that the FASB issued on FAS 157 regarding marking securities to fair value in unstable markets. Here is what Bank of America had to say in their Unaudited Statement of Financial Position for June 30, 2009 regarding their change from old FAS 157 to the updated FAS 157-4:

    I understand what you are saying, however, I also don't think FAS 157-4 is what is keeping the banks from going bankrupt. I don't necessarily agree with the updated statement, but I do understand its necessity in unstable market conditions. I feel that the FASB should not have bowed to lawmakers regarding mark to market accounting. I also know that the market understands what mark to market is and Bank of America, Goldman Sachs, et al would not have been able to sell bonds or stock to raise capital to payback these loans if Wall Street had concerns about the firms accounting methods or possibility of bankruptcy.

    Why shouldn't they be "punished?" They held the stock at the time the banks had major problems, they were the owners of the company. When a company has financial problems it is usually the owners that have to pay the price. Why should this be any different? You take a risk when you buy into a company via stock, you have to be fully prepared to take the good along with the bad.
     
  14. itcheroni macrumors 6502a

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    #14

    They should "pay" by having the company go bankrupt. It is not the people holding the stock at the time of the risky actions being punished, it is whoever is holding the stock at the time of the announcement of the issuance of new shares who are being punished. If the company had gone bankrupt, the stockholders would pay, but the company management would be out of a job. Now, they borrowed money to give themselves bonuses, and to repay that, they are issuing stock. And they company is staying afloat only due to accounting that would normally be considered fraud. Now, not only will they end up bankrupt anyway, they will take us regular people with them as we are now more entrenched than ever. So rather than both the stockholders losing out and the management losing their jobs, the management get huge bonuses and only the stockholders (there's no telling when they bought) are paying. And much like stock shares dilute with the issuance of more stock, the all Americans pay through the issuance of more dollars. It would have been much simpler and better for the economy to have let them go bankrupt at the time they were going bankrupt in the first place.

    And I wouldn't call this market unstable. Bankers and the government just don't like where it's stabilizing.

    Are you sure you want to quote Bank of America on their own financial statements? Just take a look at what banks and financial firms were saying between 2003-2008.
     
  15. Counterfit macrumors G3

    Counterfit

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    #15
    I saw the thread title and thought it was about the bridge in Boston. :confused:
     
  16. rhsgolfer33 macrumors 6502a

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    #16
    I have a very hard time believing our economy would be stronger if the myriad of banks that required TARP aid failed. A large portion of our economy revolves around credit, without large banks to issue that credit we could be immeasurably worse off that we are now.

    Sorry, I will use the proper terms as per FAS 157-4. It should be when the volume and level of activity for the asset or liability have significantly decreased and the transactions are not orderly. Stability was obviously a poor word choice on my part.

    I have no problem quoting Bank of America on their own financial statements, especially years 2003-2008 since they have been audited. I'm much more wary of quoting the 2009 ones as I did since they are yet to be audited. What banks and financial firms were saying on their 2003-2008 financial statements would be considered of little relevance to the future by some people. Financial statements represent the past, a snapshot of the company as it exists at whatever the company's year end is, they don't claim to represent what could possibly happen in the future. It is rather unfortunate that some investors are so locked into ratios and numbers on financial statements that they ignore what those numbers actually represent and the methods that are used come up with those numbers.
     
  17. stubeeef macrumors 68030

    stubeeef

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    #17
    Weak sarcasm when you don't really understand the problem.
    Why not get NON lazy government workers that do the actual enforcement.
    Madoff would have been caught way earlier had anyone actually looked at what they were given. It was all fraudulent data.
    It is like adding another gun law, when no one is enforcing the 200 gun laws.
    More tax is not the answer, doing the work is.
     
  18. itcheroni macrumors 6502a

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    #18
    I would prefer to compare quotes and sources to their historical accuracy. For example, if Ben Bernanke or the BOA CEO has been wrong or misguided several times in the past few years, I would rather listen to someone else who did get it right. That is what I was referring to. Plus, you can also use your own brain. I have a hard time believing that the change in accounting: did not have a material impact on the Company’s financial condition and results of operations. Rather than huge losses, they can claim huge profits off the same assets. If it did not have a material impact, and they're not lending to consumers, where are these profits and numbers coming from? It can't all just be fees they're imposing on customers, can it?

    I concur what your assessment of numbers and ratios, but maybe you should carry it further. I personally don't trust a company if I don't understand how it's making money.
     
  19. opinioncircle macrumors 6502a

    opinioncircle

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    #19
    Completely agreed. In France, they have introduced with much fanfare a tax on bonuses, but they still don't know how they will apply it.

    All of this is designed for us, common folks, to go like "Oh, cool they're actually making changes".

    When I sit in my international corporate finance class, then I realize that we create value out of absolutely NOTHING - read interest rate/currency swaps...
     
  20. rhsgolfer33 macrumors 6502a

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    #20
    I can look into how change in loss on the assets is adjusted, as I'm not entirely sure off the top of my head. I don't think they're rebooked as profits. I do know a fair amount of mark-to-market accounting, however, I don't know a lot about this new, complex part.

    You're correct, it is definitely not all fees. However, keep in mind that BoA did record a $1 billion loss in the third quarter, I'm not sure as to their projections for the 4th quarter. Goldman Sachs, on the otherhand, probably made most of their profits this year through fairly aggressive trading; they're in a little different league that BoA.

    I am pretty much in agreement with you on this, however, it is not that I don't trust them, I just wouldn't invest in them. If I don't understand something I try not to make judgements about whether I trust the company or not, rather, I wouldn't be inclined to risk my money when I don't have a good understanding of the way they do business or how they create a profit.

    That is exactly my opinion. I'm fine with this tax (probably one of the few times I will ever utter those words), but please, don't tell me it is to decrease bank risking taking. Let's use it to pay for healthcare or something along those lines and market it that way. I'm sure people aren't going to feel too bad that the banks are footing a chunk of the bill for a new healthcare system.

    Yeah, when I tutor students in finance I have a pretty hard time explaining why some of these tools actually have value or even how they're created, haha.
     
  21. itcheroni macrumors 6502a

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    #21
    I wasn't sure before but I just heard on the radio that 34% of Citi shares are owned by the taxpayers.

    Interesting situation we have here. The government creates money and dilutes the dollars in existence to bail out Citi. Citi creates shares and dilutes the shares in existence to pay back the bailout. Looks like a win-win situation for the government and Citi. The only losers are people holding dollars and Citi shares...
     
  22. IntheNet macrumors regular

    IntheNet

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    #22
    The left enjoys all taxes, just not paying them! Judging from the number of tax delinquents in the Obama Administration, there's real truth in that assessment!

    In regard to the EU call for tax on bank transactions, this is in direct conflict with economic recovery! Imagine: taxing bank transactions on one hand and on the other expecting private investment to grown toward recovery! The hands are in direct conflict! Expect Obama & Co. to jump at this one!
     
  23. Counterfit macrumors G3

    Counterfit

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    #23
    Yup, that's me. Keep bringing in new taxes so I can not pay them!
     
  24. GfPQqmcRKUvP macrumors 68040

    GfPQqmcRKUvP

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    #24
    How do you think this is going to add to the dialogue of this board? Do you think you are going to persuade anyone by throwing mud around like that? Seriously, get a clue. I had a bit of hope that you wouldn't come back after your temporary ban. I figured getting embarassed over and over would take its toll on you.
     
  25. IntheNet macrumors regular

    IntheNet

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    #25
    Over across the pond Tobin nixes this tax:

    Tobin himself abandoned the idea so why is the EU even debating this tax?
    http://www.ft.com/cms/s/0/fa821d80-e916-11de-a756-00144feab49a.html

    Case in point here in this nation about the progressive left enjoying the imposition of all taxes just not paying them: House Ways and Means Chairman Charlie Rangel (D-Crook)!

    ~

    Republican Rep. Eric Cantor phrased it best: “It’s easy for Democrats to sit here and advocate higher taxes because — you know what? — they don’t pay them
     

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