“Bombing your ignorance we're feeding your insolence”

As the Securities and Exchange Commission becomes a virtual rule-making factory, beginning work on the approximately 100 rules required by Dodd-Frank, it should come as no surprise that lobbyists are working hard to make sure their voices are heard on the financial reform act. The massive act has even inspired new players to up the ante in their donations to politicians and hiring lobbyists to argue their case. And just in time as critics pan the new report from the National Commission on Fiscal Responsibility and Reform for excluding the taxation of certain markets from their report. The new players in question, high-frequency traders can only be next.

In an article on Bloomberg.com, (here), “High-Frequency Traders Lobby, Donate to Head Off U.S. Rules,” reporters detail the increasing involvement of companies such as Getco LLC, or Hard Eight Futures LLC, in lobbying public officials, quadrupling involvement in the past few years. The reason—“There is an old saying in Washington that if you are not at the table, you are on the table,” said Georgetown University James Angel, as quoted by Bloomberg. The reporters and editors on the story couldn’t find a more perfect quote to sum up the post-Dodd-Frank era.

 Taxes have already been proposed on the international currency transactions market and the critics have criticized the deficit report for failing to consider a tax on the Wall Street speculation. In his blog on SeekingAlpha.com, (here), Dean Baker, co- director of the Center for Economic and Policy Research, called it a “striking omission.” He said the omission is “striking because the co-chairs made a big point of saying that they looked everywhere to save money and/or raise revenue… It is even more striking that the co-chairs apparently never considered a speculation tax since Wall Street's reckless greed is at the center of the current economic crisis.” Uh-oh. Back to blaming Wall Street. Baker does note a conflict of interest as the commission’s co-chair Erskine Bowles in on the payroll of Morgan Stanley and his point is well argued. More blogs attacking the so-called “omission,” have appeared on the Huffington Post (here) and (here), and by the non-profit organization, the Public Citizen (here), to name a few. Sifting through the hundreds of blogs and groups supporting the tax could take as long as Dodd-Frank.

So high-frequency traders are right to be concerned, as the speculation tax gains steam. These taxes have a wide base of support and are believed to be capable of raising billions. The proposed taxes are tiny, generally less than a quarter of a percent. The group “Wealth for the Common Good” supports the highest I have come across, (here) at 0.25% for a stock trade. But the real concern is it will increase the cost of doing business, which will already be burdened by the $20 billion tab so Dodd-Frank. And who pays for the increased cost of business? The consumer.

  

What I want to know is when did it become considered the right of the government to raise taxes. When colorful language is used to attack the financial system such as “reckless greed,” it is easy to raise the “insolence” of the American people towards the industry. In the words of the artist Serj Tankian in the lyrics to his song “Left of Center” (here), these words bomb the ignorance of those who do not realize a tax on the banking industry is a tax on consumers. But instituting a tax on this sector is instituting yet another tax on taxpayers. If a person makes enough to be involved in the financial sector in some way, whether it is in the debit-card market, home-ownership of through retirement plans. These costs will trickle down to consumers. I agree with the commissions ultimate goal to cut spending but increasing taxes in a time of financial instability is not the way to do it.