Re: Support of the Financial Crisis Responsibility Fee
January 25, 2010
Dear President Obama,
We, the undersigned organizations, are writing to thank you for your leadership on financial services reform and applaud your proposal for a Financial Crisis Responsibility Fee to recoup TARP bailout funds. Your tax on the covered liabilities of financial institutions with $50 billion or more in assets would raise an estimated $90 billion over 10 years and get the funding back from the institutions whose reckless behavior caused so many of the problems we now face.
In addition, we believe that we need action that will change the behavior of the financial institutions, and dampen the speculative trading that brought us to this crisis. We also need action that will support the lost jobs, lost homes, lost retirement funds and college savings.
We believe the best way to do this is by placing a securities or speculation transaction tax on trades of stocks, options and swaps, while exempting the middle class who hold securities for longer term investment. A modest tax of 0.25 percent at time of purchase would provide a permanent reliable revenue stream of approximately $100 billion a year for job creation and other social purposes. We support the proposals introduced in the House and the Senate by Rep. Peter DeFazio and Senator Tom Harkin and ask that you take these measures under consideration.
This type of transaction tax has numerous strengths. It would be harder for firms to evade and would have the added benefit of discouraging dangerous financial gambling and high-volume, high-speed, speculative trading. It will also curtail the size of the bank bonuses that have been so infuriating to the American people.
The idea of a transaction tax is not a new one. The United States had a transfer tax from 1914 to 1966 which levied a 0.20 percent tax on all sales or transfers of stock. In 1932, Congress more than doubled the tax to help financial recovery and job creation during the Great Depression.
Critics charge that if the United States reapplies this tax domestically it would push trading overseas. This claim is demonstrably false as the United Kingdom currently levies a similar tax and has the highest volume exchange in Europe. Moreover, every major European leader is now calling for this type of tax to be applied globally.
As you have said, people are mad that the Wall Street “fat cats” have been bailed out and are doing just fine with record bonuses being reported each week, while millions on Main Street are still suffering.
For their own good, for the good of the country, if Wall Street titans will not step up to the plate and do the right thing, we must ask them to do so. We will work with you to educate the public about the many benefits of this type of tax and how the funds can be immediately put to use to create jobs.
With your continued leadership on these issues Wall Street can be put to work rebuilding Main Street in a meaningful and sustained fashion, a task they have too long ignored.
Americans for Financial Reform
Click here for a PDF version of the letter with a list of AFR’s partners.