Thursday, August 27, 2009

Financial Services Authority chairman backs tax on 'socially useless' banks.

The fact that the country spent billions of pounds bailing out the banks and the bankers immediately resorted to their old habit of rewarding themselves with million pound bonuses was bound to cause some reaction within the government; though I doubt the bankers expected the reaction which is currently being considered by the government's top financial regulator.

Lord Turner, chairman of the Financial Services Authority, warned bankers that he would support a new wave of taxes on the City to prevent excessive profiteering if they continue to take excessive risks.

In a searing critique of the industry, Lord Turner described much of the City's activities as "socially useless" and questioned whether it has grown too large.


The idea was recently put forward by anti-poverty campaigners who have argued that a small levy applied to each transaction would mean billions of pounds could be redirected to support developing nations. Turner said he sympathised with applying a tax that would be "a nice sensible revenue source for funding global public goods".


"And if increased capital requirements are insufficient I am happy to consider taxes on financial transactions – Tobin taxes."

A tax on financial transactions was first suggested by the American economist James Tobin in the early 1970s, but the lack of interest in Washington and London meant it never gained traction.

Turner won the support of some Labour backbenchers, who said his willingness to consider taxes was a step in the right direction.

The former welfare minister Frank Field said the lack of action by the authorities was "in stark contrast to the damage done by the people paid massive bonuses".

He said: "It looks like Adair Turner has fired the starting gun on thinking more seriously about the City and what it is for and what kind of pay people should expect.

"When the City has largely made money by moving money around and not by making anything, it is clear the pay is out of kilter."

I am obviously speaking as a layman, but one of the things which struck me about the deals which led to the sub prime mortgage crisis was that the people taking the most insane risks were able to sell those risks on to others who were even more insane gamblers than they were.

Perhaps that makes sense in the city of London, but it's not the image of bankers which most of us have in mind, and it's certainly not behaviour which most of us think should be rewarded by million pound bonuses.

This is an idea which has been floating around for decades with no government brave enough to take it up.

The bankers have no-one to blame but themselves for the drastic change in the public mood which now allows Labour to consider this.

They've taken billions of pounds in bailouts, they pay an infinitesimal amount of interest to their savers whilst charging huge amounts for loans, all the while rewarding themselves with huge bonuses for keeping this crap game afloat.

Labour can do to them what they will. Public sympathy for these buggers is as dead as the notion that they are "wealth creators".

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