I am honored to be here with people and organizations that deserve big credit for the progress we’re seeing on financial reform. I say that because I don’t see any other way to explain what’s happened over the past year.
In June 2009, Treasury Secretary Tim Geithner released his proposal for reining in Wall Street. It was incredibly timid. But Wall Street lobbyists still went into a frenzy, spending hundreds of millions trying to gouge out anything meaningful. At 5:30 am today, after 20 hours of debate, Congress wrapped up what will likely be the final version of a financial reform bill. And guess what – despite all that corporate lobbying, it’s stronger than the Geithner plan.
The only way to explain that is the street heat generated by Jobs with Justice, the AFL-CIO, SEIU, and other groups here today. The Wall Street “showdowns” they organized in Chicago, in New York, in Washington and elsewhere helped stiffen the spines of Congress.
Unfortunately, though, we’re not getting everything we want just yet. To have a just and sustainable economy, we have to transform the financial sector so that it serves real economic needs. The sole purpose of banks should be to take savings and turn it into productive investment that supports good jobs and health communities.
That’s not what we’re getting in this round of the fight. We’re getting a few more controls on banking, but we’re not breaking up the banks. The “too big to fail” banks are bigger today than before the crisis. And as long as that’s the case, taxpayers will always be on the hook for more bailouts.
In addition to breaking up the banks, I want to pitch one more priority for Round Two of the Wall Street showdown. This is the financial speculation tax. Basically, the idea is to put a tiny tax on each trade of stocks, derivatives, and currencies. The target would be the high flyers in the financial casino – the guys doing the high-speed stock flipping and derivatives gambling. These are the types of financial activities that have almost nothing to do with investing in real needs.
A speculation tax would discourage that purposeless behavior. It would also generate big money. We’re talking about $180 billion per year — more than any other revenue raiser on the table.
My colleagues and I calculated how much could have been raised if speculation taxes had been in place before recent financial fiascos. Take AIG, for example. A speculation tax on the $440 billion in crazy credit default swaps issued by the insurance giant would have generated as much as $1.1 billion. That’s enough to cover the salaries of more than 20,000 elementary school teachers.
I’m hoping that many of you will decide to get involved in the growing campaigns around speculation taxes, campaigns that have already brought together diverse forces, including union, environmental groups, and global health advocates. I’ve just come from Toronto, where allies from a dozen countries were gearing up to push this at the G-20 summit this weekend.
If you look back at history, it took seven years and six major pieces of legislation during the Great Depression to stabilize the financial system – until the deregulators came in and messed it up again. We’re less than two years into this crisis, and we have the momentum on our side. I look forward to working with you in a long-term fight to rein in Wall Street.