Earth to banks: “Where will you go?”
Every time anyone suggests that the finance sector do something to pay back the trillions of taxpayers’ money used to bail them out, they insist that such demands are unrealistic because they will simply up sticks and move elsewhere. There are many reasons why this is a gamblers’ bluff that should be called (even the Financial Times has said so), but, increasingly, the main reason is going to be that governments are beginning to circle the wagons around the finance sector, and it won’t have anywhere to go.
This may be the beginning of the end to the regulatory and fiscal arbitrage that the finance sector has been practicing (and – in full on blackmail mode – threatening to practice) for years, picking off government after government and demanding a lax environment everywhere in which to make their bloated profits and bonuses.
This week, France’s President Sarkozy pressed ahead with an admittedly rather minimalist unilateral financial transactions tax. His Government was one of nine that called on the Danish G0vernment, the current holders of the EU Presidency, to press ahead with a European FTT. In both cases, the finance sector has claimed that the measures will drive them abroad (like that was a bad thing, given how much damage they’ve done to their host economies, but let that pass!) But where will they go? Because now the US President has unveiled what is likely to be his election campaign budget – and it contains a new $61bn tax on financial institutions over the next decade, in an effort to recover the costs of the financial bailout.
Unions in the US are backing politicians who are starting to get tough with the finance industry, although there is a long way to go. AFLCIO President Rich Trumka says the Obama budget proposal “puts us on the right path towards building a solid foundation for our economic future.” And it would be far more effective if the world’s leaders (who aren’t quite acting together yet – the British Government continues to act like the finance sector’s lapdog) could act together through bodies like the G20.