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Wally Turbeville: Robin Hood tax will mitigate problems of Wall Street’s trading behavior and move us towards creating jobs through manufacturing, innovation, and infrastructure

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JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.

Here at The Real News, as you know, we’ve covered the financial transaction tax, also known as the Robin Hood tax. It’s essentially a tax of less than one-half of 1 percent on Wall Street transactions, the goal being to generate revenue from Wall Street speculation rather than cut spending on social programs.

With us to discuss the upcoming congressional briefing in March for the Robin Hood tax is Wally Turbeville. He’s a senior fellow at Demos and a former investment banker at Goldman Sachs.

Thanks so much for being with us, Wally.

WALLACE TURBEVILLE, SENIOR FELLOW, DEMOS: Oh, it’s great to be with you this afternoon.

DESVARIEUX: So let’s get right into it, Wally. As I mentioned in the introduction, the Robin Hood tax would be less than 1 percent on Wall Street transactions, and it could generate hundreds of billions of dollars. How much money are we really talking about? And what other benefits do you see coming out of this tax?

TURBEVILLE: Well, first of all, because it’s on such a large body of activity, which is the trading markets, and the trading markets are trillions and trillions of dollars each year, the tax that was very small generates a great deal of revenue. It could be $300 billion to $500 billion of revenue a year.

But the law depends on precisely how it’s imposed, because one of the things that will happen is that the tax will change some of the behavior in the trading markets. And that leads to the other aspect of this, which is that the tax itself will mitigate some of the problems that we’ve seen from the tremendous amount of trading activity on Wall Street and the fact that more and more the economy is turning into a financialized economy, meaning more and more of the whole economy is all about money and banking and less about manufacturing, innovation, and infrastructure, those areas that create jobs.

DESVARIEUX: But of course you’re going to hear from Wall Street people saying that, oh, this tax will hurt the markets. But we should mention that the financial transaction tax is being implemented in 11 E.U. countries. And there’s been–what kind of repercussions have come out of such a tax? Has it really affected the financial sectors? And are bankers even complying with it?

TURBEVILLE: Well, I think that one of the things that’s important now, as opposed to before: there was–historically there’s been some concern about compliance. But now that two things have happened–one, people keep track of data a lot better, and two, one of the things that’s happened with financial reform, both here and in Europe and in Asia, is that there’s a lot more tracking of transactions. So compliance is not so much of an issue. The information associated with trading is fairly readily available and can be accessed–at least someday it will be accessible by regulators and tax authorities.

I think the experience so far has been pretty preliminary. There have been some complaints, but I don’t think it’s surprising to see some complaints from the financial sector as to what’s going on. They don’t want this tax to occur.

I think objectively things have gone relatively smoothly, and the real question is is what happens if, as the financial transaction tax is, hopefully, migrated into some of the larger trading environments, like London, New York, Tokyo, and Hong Kong, that would be sort of more interesting and more informative as that happens as to exactly what’s going to happen.

I think that one of the things that you said is it’ll affect trading, and that’s true, I think the point being that’s not a bad thing, that’s a good thing.

DESVARIEUX: Okay. And do you see them actually passing on any cost to pensioners, for example, or any clients, like, any of these taxes? Are they just passing the buck to their clients?

TURBEVILLE: I think what most of the research shows is that the cost itself will be absorbed at several levels along the chain.

First of all, the cost on an investment is very small. Remember that the individual transaction tax is very, very tiny. In aggregate, the cost will be more borne by the trading firms most often using high-speed computers and software, so this trading done by computer, by trader robot, if you will. And that churns the market. That’s much, much more of the activity and much, much more of the actual kinds of behavior that’ll be taxed than an investor putting money into a project or a company or a government through investment. So the actual impact on pensioners would be very small from a tax perspective.

However, what it will do for the whole economy, because it raises money and because it also will change excessive churning, trading in the marketplace, means that all of the investments will be more valuable. And that benefit will swamp the tiny tax impact that might be felt by investors.

DESVARIEUX: Alright, Wally, I’ve got to ask you this, because I’m sure our viewers are thinking it. You’re a former Goldman Sachs banker. You’ve had an insider view on Wall Street and the financial world. Why do you support the implementation of such a tax?

TURBEVILLE: Well, I come from an era on Wall Street where it was much more likely that the bankers recognized that there was a long-term view to what we did. In other words, we had it–we were just–it was in our interest, actually, to serve the long-term good of the economy. That has changed in the years since I left Wall Street. I left in 1997. I left Goldman Sachs. So from my perspective it’s completely in line with the way I thought and behaved at the time. I mean, it’s in all of our interests to make sure that the financial system works well to fuel the economy, and so that everybody is benefited as well as just–more than just individual traders and bankers.

DESVARIEUX: Okay. Well, Wally, thank you so much for joining us.

TURBEVILLE: It’s great to be here.

DESVARIEUX: And thank you for joining us on The Real News Network.


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Wallace Turbeville is a Senior Fellow at Demos and former investment banker at Goldman Sachs. He is the author of Demos’ recent series, Cracks in the Pipeline, which examines the tie between regulation and the financial market’s efficiency. In addition to his notable publications, Wallace has also given testified on financial reform issues before the Permanent Subcommittee on Investigations of the US Senate Committee on Homeland Security and Governmental Affairs and the House Financial Services Committee.