Much has been made today of the fact that Gordon Brown and Nicolas Sarkozy have jointly written an opinion piece in the Wall Street Journal. Like some new entente cordiale, this is fantastiche to see the coup de grace of global leaders working in partnership.
Here are some highlights from their article:
“The way global financial institutions have operated raises fundamental questions that we must—and can only—address globally.
“We have found that a huge and opaque global trading network involving complex products, short-termism and too-often excessive rewards created risks that few people understood. We have also learned that when crises happen, taxpayers have to cover the costs. It is simply not acceptable for them to foot the bill for losses in a deep downturn, while institutions' shareholders and employees enjoy all the gains as the economy recovers.
“Better regulation and supervision are the means by which the risk to the taxpayer can be reduced for the longer term …
“There is an urgent need for a new compact between global banks and the society they serve:
“A compact that recognizes the risks to the taxpayer if banks fail and recognizes the imbalance between risks and rewards in the banking system.
“A compact that ensures the benefits of good economic times flow not just to bankers but to the people they serve; that makes sure that the financial sector fosters economic growth.
“A compact that ensures financial institutions cannot use offshore tax havens to negate the contribution they justly owe to the citizens of the country in which they operate—and so builds on the progress already made in ending tax and regulatory havens.
“Therefore, we propose a long-term global compact that will encapsulate both the responsibilities of the banking system and the risk they pose to the economy as a whole. Various proposals have been put forward and deserve examination. They include resolution funds, insurance premiums, financial transaction levies and a tax on bonuses.
“Among these proposals, we agree that a one-off tax in relation to bonuses should be considered a priority, due to the fact that bonuses for 2009 have arisen partly because of government support for the banking system.
“However, it is clear the action that must be taken must be at a global level. No one territory can be expected to or be able to act on its own.”
Hmmm …in yesterday’s pre-budget announcement the UK Treasury leader Alistair Darling announced a unilateral 50% tax on any bonuses over £25,000 with immediate effect.
First, the banks will find a way around such a tax.
Second, there’s already a 50% tax rate on earnings over £150,000 so big deal.
Third, what’s the point of unilaterally taxing bankers if other nations, especially the USofA, don’t do this, as it will just means bankers move to other financial centres to work.
Aha. So that’s why Gordon Brown has written an article in the Wall Street Journal – a USofA financial paper –avec M. Sarkozy who will naturally be supportive as his lead Finance Minister, Christine Lagarde, has been fighting this corner for a while. The aim being to show a united European approach and place pressure on Barack Obama to follow suit, as discussed in the New Yorker (Will Obama tax the Banksters?).
Add all this up with the sweetener that the new head of financial regulation in Brussels, Michel Barnier, is Sarkozy’s lieutenant and maybe this all explains why Mr. Brown is cosying up to the French.
Je comprend maintenant.