Regulation of banking has a long and storied history in America. Opposed by Thomas Jefferson, lauded by Alexander Hamilton, killed by Andrew Jackson and brought back by Woodrow Wilson, the relationship between the American government and the many banks that populate our land has often been a point of contention.
This discussion has been renewed by presidential nominee and Independent Democratic socialist Bernie Sanders. Bernie Sanders has made financial reform, including a tax on Wall Street speculation, a key issue for his platform.
Sanders has said, “establishing a 0.03 percent Wall Street speculation fee, similar to what we had from 1914-1966, would dampen the dangerous level of speculation and gambling on Wall Street, encourage the financial sector to invest in the productive economy and reduce the deficit by more than $350 billion over 10 years.”
These taxes are necessary to rein in the power and recklessness of the so-called “too big to fail” banks in America. These institutions have often been criticized for gambling billions of dollars on risky financial endeavors while expecting a bailout with public taxpayer money. The inability of the federal government after the 2008 financial meltdown to properly control and regulate the financial institutions that contributed to the meltdown infuriated many Americans. Part of the government’s failure to control the banks comes from their extraordinary effect on the nation’s economy, as emphasized by Sanders.
“The six largest financial institutions in this country today hold assets equal to about 60 percent of the nation’s gross domestic product. These six banks issue more than two-thirds of all credit cards and over 35 percent of all mortgages. They control 95 percent of all derivatives and hold more than 40
percent of all bank deposits in the United States.”
These institutions become impossible to effectively regulate due to their heavy influence and power. The first step to combat this would be to tax and break up these banks.
The Wall Street speculation tax would be a first step that is necessary to help control the financial institutions that have jeopardized the finances of millions of Americans. Banks should obviously be allowed to exist. However, the idea of a bank – a private institution – having enough political power and influence that it cannot fail and will instead be bailed out by taxpayers who are unable to regulate it is ludicrous. It is an insult to the millions of families that were financially devastated by the 2008 recession. Besides the benefits of breaking up and regulating financial institutions that have dangerous levels of influence, the speculative tax on Wall Street could be used to fund necessary social programs and provide the funds to enact needed social legislation.
Funds generated from the speculative Wall Street Tax could be used to make higher education more affordable for millions of Americans. Sanders’ education reforms would make college less expensive, lower the interest on student loan debt and even make public universities tuition free. This plan could be completely funded by a Wall Street speculation tax, and it would help bridge the economic divide between social classes as higher education becomes more essential and yet more expensive.
Love him or hate him, I think both sides can agree that the influence of Wall Street has gotten out of hand. Sanders’ speculative tax would be the first step to rein in the control and influence that the U.S. banking institutions have on our politics. The American people shouldn’t be seen as emergency piggy banks to be smashed when these banks collapse. The speculative tax would help pay for needed social reforms, especially those related to higher education.