Still think the IMF is a toothless beast? Still think we should be letting the UN lead the US around by the nose? Still think we are getting some kind of benefit from being part of the United Nations?
Banks and traders may face an unprecedented new international tax on finance under radical new plans being drawn up by the International Monetary Fund.
IMF managing director, Dominique Strauss-Kahn, has revealed that the Fund is constructing plans to create an insurance fund into which banks around the world may be forced to pay, to help “mitigate the risks they are creating”.
The plans echo a recent suggestion by Financial Services Authority chairman Lord Turner that he may consider levying a so-called Tobin tax on financial transactions in order to rid the system of excessive speculation. Although Mr Strauss-Kahn said a simple Tobin tax, which its creator, Nobel laureate James Tobin, proposed should be charged on all foreign exchange transactions, would “not work for many technical reasons”, he said the Fund was now working on alternative models.
“The financial sector is creating a lot of systemic risks for the global economy… it is fair that such a sector should pay some of its resources to help mitigate the risks they are creating,” he said. “Having some money to create a fund for insurance or funding for low-income countries – that we would like to consider.”
The news will fuel concerns among banks and investors that they will soon fall victim to a second wave of regulation and charges as the full economic consequences of the financial crisis materialise. And in a sign of the Fund’s determination to construct just such a charge, which was raised at last week’s G20 summit in Pittsburgh, Mr Strauss-Kahn said he had asked his second-in-command, John Lipsky, to prepare a report about the plans.
Mr Lipsky, himself a former banker, said: “It is right to think about [the costs of a crisis] being borne by the financial sector more broadly.”
Guess who gets to pay that tax?
The financial sector?