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The Tobin Tax: Momentum appears to be building in the European Union for a tax on financial transactions. The idea is referred to as the “Tobin tax,” after the late James Tobin, an economist who suggested a tax on currency transactions after the Bretton Woods system broke down in the early 1970s. The aim, in Tobin’s words, is to “throw some sand in the wheels” of the markets as a check on volatility. The tax European leaders are now discussing would cover much more than currency trades, though, and while supporters do still cite the potential stabilizing effects for markets, replenishing public coffers in the midst of the sovereign debt crisis is also a goal. In an address to the European Parliament Wednesday, José Manuel Barroso, the European Commission president, framed the issue as “a question of fairness”: “It is time for the financial sector to make a contribution back to society.” Critics of the proposal have said it could drive business elsewhere. As one of the writers for the FT’s “Lex” puts it in this video, “you might want to buy shares in property for Bermuda.” (Warning: aside from losing some of the mystique around “Lex” by seeing the people who produce it identified on camera, you’ll have to sit through a treacly ad for Goldman Sachs before the actual clip starts. Nevertheless, we felt smarter, on balance, after watching.)
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Fed Watch: Federal Reserve officials are on the stump to defend Operation Twist from criticism by dissenters within the central bank and Republican lawmakers and presidential candidates, the Journal reports. They get a helping hand on the paper’s op-ed page from former Fed governor Alan Blinder, who lauds the “sleeper” element of this third round of quantitative easing: the reinvestment of principal repayments from its mortgage-backed securities portfolio in new MBS. Aside from tightening the spread between mortgages and Treasuries, thereby making it likelier that lower Treasury yields will translate into lower rates for homeowners, “the idea is, as they say, scalable,” Blinder writes. “A future round of quantitative easing (QE4?) that concentrates on private-sector securities like MBS, rather than on Treasurys, is now imaginable,” which for him is a welcome thought. Some Journal readers would beg to differ. In letters to the editor, one reader calls for fiscal, rather than monetary stimulus, and another calls the super-low-rate policy “class warfare on the class of savers. Now grandma has to be worried not only about Social Security and Medicare, but also being able to live off any savings at all.”
Despicable He: "I go to bed every night and I dream of another recession." So declared Alessio Rastani, an "independent trader" interviewed by BBC News Monday in a video that's gone viral (669,144 hits on YouTube as of Tuesday night). He scoffed at the European leaders' rescue plan, predicted the Eurozone market would crash, and said he looked forward to profitably trading on such an event. "For most traders, we don't really care that much how they're going to fix the economy … our job is to make money from it." Blogosphere reactions ranged from "what a jerk" to "well, at least he's candid" to "that guy's smart" to "this has to be a hoax." That last interpretation was fueled by the fact that the BBC had been conned once before not too long ago. Some suggested he might be a member of the "Yes Men," a "culture jamming" group (don't be embarrassed, we had to look that one up ourselves; think countercultural pranksters), but the group denied this. Reuters blogger Felix Salmon argued it's possible that Rastani could be both what he says he is and a subversive joker; Salmon notes there is "a strong nihilistic and even anti-capitalist strain" in the thinking of independent traders. All we'd add is that in some parts of the interview Rastani sounded like a cultish self-help guru narrating an infomercial. More than once he told viewers that profiting from a market crash is something "anybody" can do. "It isn't just for some people in the elite." And those bits gave us the creeps more than his Big Short-style misanthropy. FT Alphaville, New York Times Dealbook, and Forbes.
Wall Street Journal
Dodd-Frank allows banks to pay interest on business checking accounts for the first time since the 1930s, but given how low rates are, many businesses aren’t all that interested. They’re finding it more worthwhile to negotiate “‘earnings credit rates’ in which the bank credits a business customer's deposit by reducing or eliminating transaction fees.”
New York Times
“Orange” you glad Capital One wants to buy ING Direct? Capital One says you ought to be. In the second of three public hearings on its merger application, the company said its deal for the online bank with the orange logo would create jobs.
Putting the mortgage liability from the Countrywide acquisition to one side, Bank of America has another problem: a shareholder lawsuit over the company’s failure to disclose what would turn out to be a $15.31 billion loss at Merrill Lynch in the days before and after that takeover. “Dealbook” suggests this claim could cost B of A $50 billion, on par with the company’s toxic housing exposure.
Financial Times
Deanna Oppenheimer, the head of Barclays’ retail banking operations in the U.K. and Europe, is leaving the British bank after six years. If her name sounds familiar, it’s because she was a retail banking executive at Washington Mutual during its “Occasio” heyday.
