Sense on Cents

The American taxpayer bailed out Wall Street. How does Wall Street return the favor and refund the American taxpayer? Why is Washington pursuing this topic now? The Washington establishment feels the beating pulse of rage from the American public.

I guess it would have been too much to expect the Washington crowd to proactively address the topic of repayment from its incestuous partners on Wall Street. In fact, we should expect to hear the Wall Street establishment bellow that they have paid back the TARP funds and that should be sufficient. Wall Street should not be so naive. The American taxpayer bailed out the entire industry as much as it bailed out any single specific firm. Washington should not be so cute in structuring a repayment program where the costs are conveniently passed along to the American public. American taxpayers should not be easily placated.

How should a program be structured? Do not think for a second that Wall Street will not look to pass along any costs to their customers. In fact, Tim Ryan said as much in a Wall Street Journal article, Banks Brace for Bailout Fee:

“In our industry, costs are typically passed along to institutions and individual investors, so the burden will likely fall on them,” said Timothy Ryan, president of the Securities Industry and Financial Markets Association. Major banks declined to comment.

Thanks Tim. Are hundreds of billions of dollars “typically” injected into the industry, as well? I think not.

High five to our loyal reader Bill for prompting the idea that if there were ever a time for a windfall profits tax, then Wall Street 2009 is it. The question still begs as to how a windfall profits tax would be structured. Where does Washington draw the line? How can it pinpoint the profits directly associated with Washington’s assistance?

Dare I suggest we start by exploring the high frequency trading activities of the major Wall Street banks. Did these banks manipulate the equity markets with the support and backing of Uncle Sam? Many, many seasoned financial professionals share that viewpoint.

Let’s start with Goldman Sachs. Hit them with a windfall profits tax on their high frequency trading. Let Goldman kick and scream. Do you think Goldman would dare tell the American public how it can manipulate the equity markets via its high frequency computer programs? Recall that Goldman’s own internal counsel made that assessment last summer when a Goldman programmer stole the ‘secret code’ to Goldman’s high frequency trading.

Might a windfall profit tax on high frequency trading merely encourage Wall Street banks to rework their computer programs? Perhaps. The windfall profit tax on these activities may also bring pressure on these activities so that real truth, transparency, and integrity are promoted.

Does Washington have the balls to clip the goose currently laying the golden eggs on Wall Street? Who in Washington might raise the topic? Where are our statesmen when we need them?

LD

This entry was posted on Tuesday, January 12th, 2010 at 8:42 AM and is filed under General, Wall Street. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.