Vidal-Folch's response to the City of London: "rubbish"

In last Thursday’s edition, the Spanish newspaper El País included in its business pages an opinion piece by journalist Xavier Vidal-Folch about the systematic opposition of the City of London to the Tobin tax. The main thesis of the article is that London is blocking the tax to protect speculators and tax havens. With this idea as the main point, Vidal-Folch reels out facts and reflections, some of which we reproduce here at The Corner to stir some discussion (don’t forget to visit our Facebook page to contribute!):

“Why has the UK boycotted this week again the Tobin tax that would tax financial transactions, at least in the EU? The idea, as articulated in a solid proposal from the Brussels directive, aims to raise €57 billion a year by taxing share sales or purchases with a 0.1% tax and derivatives transactions with a 0.01%.

“Unlike the previous summit in Toronto, the last G-20 meeting in Cannes sympathetically said it had ‘knowledge of the initiative taken by several of our countries,’ also known, by some, as the Robin Hood tax… The change in tone, supported by a benevolent Washington, came after intense pressure from France and Germany, and the complicity of Argentina and Brazil. If the United Kingdom continue to block it, said German Finance Minister Wolfgang Schauble, the euro zone should ignore it and act without them (the basis for this is: Article 136 of the Treaty).

“The tax would be liquidated in the city-base of the financial institutions, which would mainly be London. The City would collect 10 times more than Paris does and five times more than Frankfurt. But Her Majesty’s Government continues to oppose it, with ever more stentorian statements. It claims that this tax would divert its financial capital to Hong Kong or other places: a questionable hypothesis. But what would immediately happen is that the Tobin tax would discourage rubbish finance: in which the City is a world leader.

“Every day derivatives are bought and sold (the most fatal kind, CDOs or collateralized or guaranteed debt obligations) in large part from the City, where they have their headquarters, for an amount exceeding one trillion dollars in closed transactions. The derivative, financial assets that do not translate into real commodity transactions, but virtual ones, caused the collapse of AIG, after Lehman Brothers, and poisoned others…

“The financial institutions, Wall Street and the City, hide and conceal some of these assets by wrapping them up in special purpose vehicles, now located in semi-off shore havens that really are terminals of the City, such as the British territories in the Cayman Islands, Bermuda or theVirgin Islands. It was also in the City where Goldman Sachs put its foot in Europe, following Margaret Thatcher’s financial Big Bang in 1986 that opened the doors to foreign entities. It was from her office in the City that the banker Antigone Loudiadis masked Greece’s accounting so that it could join the single currency in the second round in 2002…

“…It was also from here that Goldman sought aid for the bankrupt Northern Rock, in 2007 and in 2009; with Lloyds; and in 2009, when it tried to relieve the agony of the Royal Bank of Scotland, glutted with toxic assets from the ultra-speculative fund Abacus…

“…And, where it was the protagonist of an attempt to blackmail the government of Gordon Brown when he established a 50% tax on bankers’ bonuses, by threatening him with leaving. It was also in London, where the major emerging economies were baptized as BRIC, and the bank began their seduction.

“More recently, last September, in London, an embezzlement of €1.5 billion euros in ‘unauthorized transactions’, consisting of speculative and hidden futures contracts by the Swiss UBS broker (the golden tax haven for criminals), Kweku Adoboli, was uncovered… UBS relapsed into its pestilent practice: it had been about to go bankrupt for cheating too much with the Lehman sub-primes in 2008, from which it was saved by a Swiss government bailout …”

A typical continental rant against the City or a fair response?

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