Tax on big banks dead for G-20?

There is currently a shift away from the Tobin tax on bank transactions, with many calling it dead since the U.S. and Canada won’t back it. The hope for consensus at the G20 now lies with a straight bank levy proposed by Germany and likely to be supported by the International Monetary Fund (IMF) at its meeting next month.

This is a big step backward as the transaction tax, long called for by progressive observers, seemed like a distinct possibility in the wake of the economic crisis. It would have put a 1% tax on the types of speculative transactions, such as derivatives, that became toxic and caused the crash. It would have caused investment banks to think twice about performing these transactions.

Instead, after having transferred their risk onto the government through the bailout money, they are able to carry on as before, while governments move towards insolvency. Where did all that momentum for systemic change go?

Like the Tobin tax would have been, the levy is to be used to create a bailout fund, though a German observer noted that it would be nowhere near enough to pay for future bailouts:

The country’s biggest lender, Deutsche Bank, would have to pay a contribution of 2.2 billion euros, equivalent to a third of its expected pretax profit this year, Merck Finck analyst Konrad Becker calculated in a research note, assuming a charge of 0.15 percent of total assets.

No. 2 lender Commerzbank would pay around 1.2 billion euros, Becker said.

The levy, based on total assets less deposits, would need to run for years to raise the vast sums needed for bank bailouts.

“That’s a joke,” Becker said of the 9 billion euro figure.