More reports on: Banks general, Economy - general
Taxing bankers profligacy news
12 November 2009

Getting the bad boys to pay for future mistakes has a delicious quality of retribution in advance. It has an air of making the banks put aside something for a rainy day, writes CNN's London correspondent Richard Quest, in his exclusive column for domain-b.

Richard QuestThe decision to hold a G-20 finance ministers meeting on the Scottish coast in the middle of winter was an ''interesting' idea.'' When we arrived at St. Andrews there was all the November weather we could want; rain and wind a plenty. The prospect of spending the next couple of days stuck in a tent (all right, a marquee) overlooking the North Sea was grim. Even members of the local Fife police on security duty wondered what on earth we were thinking of. I was already writing clever script lines about windy economic weather and force gales blowing stock markets.

By morning, I was warming to my task, and the weather was playing along nicely. The sun had come out and so had my metaphors. Suddenly the G-20 was seeing sunny patches of economic growth with clouds on the horizon. Oh yes. There was plenty of room to allow this one to breathe.

But like the Scottish weather, what should have been a rather predictable G-20 meeting suddenly took a sharp, odd turn. A thunderstorm opened overhead -- all because the British Prime Minister Gordon Brown chose to mention the "transaction tax.'' The idea is simple: tax financial institutions like banks and investment houses on their activities.

The tax would prevent them from running unrealistic risks. The money raised would be used to pay for any future financial crises. It is getting the banks to pay for their own bailouts. Buying an umbrella before it rains, if you will.

The idea is often called ''the Tobin tax'' after the American economist who won the Nobel Memorial Prize in Economic Sciences and who first suggested taxing foreign exchange transactions in the 1970s. ''Tobin taxes'' have been proposed in various forms ever since. By raising it again, Brown set off a large storm on the G-20 horizon that threatens to blow a hole in any idea of unity.

The French finance minister Christine Lagarde liked the idea of ''getting the banking system to provide for itself.'' Telling me that it is ''quite appropriate'' as a means of exploring a new project, Lagarde seemed most enthusiastic about the idea.

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Taxing bankers profligacy