Good idea, poor reception.
So, a presumably frank and productive discussion on creating a "framework to promote a better balanced global economy" was derailed by concerns over a universal tax on banks. I wonder if I’m the only person whom that strikes as ironic.
Just so I’m not accused of misunderstanding what’s going on here, I submit the following: "The G20 agreed a detailed timetable for the new ‘framework for strong, sustainable and balanced growth’ with finance ministers committing to have peer review and ‘more specific policy recommendations’ in place by next November." This harks back to the Great Depression during which the financial institutions, having crushed themselves under the weight of the "free markets" they presided over, approached governments begging for more regulation of their own industry. I think the buzz phrase for that sort of thing in the modern vernacular is "sustainable growth."
I wish the finance ministers luck in unraveling the Gordian Knot which is the global legal, institutional, and regulatory framework of capital markets. This is going to be especially difficult since no compelling consensus seems to be forthcoming. According to the article the ministers are even punting on how to finance aid to developing countries to address climate change until Copenhagen. So it’s difficult to conceive that they will be successful in negotiating the details of such a tax.
The notion of a global bank tax was introduced into polite company by the UK’s premier Gordon Brown. The only way such a tax is likely to be politically feasible is if international organizations try to impose the tax both universally and simultaneously, because otherwise there will be too much incentive for individual nations to defect and try to gain a competitive advantage.
The policy suggestion to "levy a tax on financial transactions" started to boil up to the surface again in the wake of the Asian financial crisis (http://mondediplo.com/1997/12/leader). The purpose is to increase the costs of high-frequency international financial speculation by taxing currency trade. Brown also suggested this would raise revenues to help banks pay for the social insurance they have been receiving from public institutions.
"Tiny" Tim Geithner promptly rejected the idea, citing technical difficulties. No surprises there. The technical difficulties are the interlocking directorates of financial institutions and the governments that regulate them. The U.S. officials are apparently far more supportive of superficial efforts to keep banks from becoming too big to fail, such as systemic risk-based insurance fees for financial institutions. This strikes me as a bit of a half-cocked measure because presumably any bank which became so heavily capitalized that the contingency of it becoming insolvent posed serious systemic risk could also afford to pay a heavy insurance premium.
All quotes not followed by citation are from http://www.ft.com/...