How about a corporate financial transaction tax?

That $6.3 trillion debt bomb upon which corporate America is sitting is now bigger than any in history, eclipsing even pre-2008 levels. The national “economic miracle” Trump keeps lauding is – like his own financial empire – resting on a bed of borrowed cash.

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The problem is, the current administration – and a bipartisan group of Senators – are determined to go the other way, having just rolled back more provisions of the already-weak Dodd-Frank Act. Returning to Glass-Steagall, which was designed to prevent banks from over-creating bad loans and pumping them into the economy via investment banking operations, seems like a distant fantasy.

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A new approach to reining in speculation is needed, which is why the tiny glimmer of good news from late last week was so welcome.

On June 27th, Sen. Kirsten Gillibrand (D-NY) became the first co-sponsor to S. 805, the “Inclusive Prosperity Act of 2017,” originally introduced by Bernie Sanders.

  Matt Taibbi

Gasp! Socialism!

The bill is the American version of a Financial Transactions Tax, a plan to raise revenue and curb speculation by attaching micro-taxes to financial transactions. The E.U. moved toward an FTT plan for 11 Eurozone countries in 2013.

The Sanders camp trumpets the plan as a money-raiser – a way to pay for big-ticket social programming like free college tuition. But it also has a huge safety component.

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[E]ven the tiniest financial transactions surcharge could help rein in greed orgies just enough to keep the economy from exploding. In the past, these micro-taxes have been envisioned as a way to pay for the inevitable bailouts in our increasingly deregulated economy.

Sounds like a great idea to me.

The idea is that greedy Wall Street players holding stock they want to sell call several brokers with buy orders to drive up the stock price - known as spoofing.

In a computer-dominated trading environment, the aim isn’t just to move the stock with your own purchase power. The idea is also to trick other algorithmic traders into mass-dumping or buying their holdings.

Using this technique, a single slick operator can generate huge volumes of transactions often without having much or even any skin in the game.

All of this activity has no real economic purpose, other than to move the “tape” for an instant or two and make some over-moussed Wall Street parasite a bunch of unearned money.

A secondary problem is that even in the rare case that authorities get around to identifying and outlawing things like this, they tend not to be able to really do much in the way of enforcement.

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There are countless other schemes HFT experts have cooked up over the years, from “order anticipation” to “layering” to modern variants on the old “wire” con from The Sting, in which traders use computers to take advantage of infinitesimal time differences in the reporting of price changes.

An eye-opening book to read on that last game - high frequency trading - is Flash Boys by Michael Lewis, author of The Big Short. Netflix has just purchased the rights to it for a movie. Should be good.

High-frequency trades currently make up between 50 and 60 percent of all stock transactions in the U.S., which isn’t inherently bad, but it’s not necessarily a positive thing, either. For sure, there’s a ton of economically useless activity buried in that percentage. A financial transactions tax kills three birds with one stone. It raises money, provides a major disincentive to socially useless volume-based trading and decreases dangerous speculative volatility.

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A financial transactions tax might help incentivize Wall Street to once again emphasize true long-term investment, as opposed to spending all day moving piles of money around. As with Medicare-for-all, it might take a while for Americans to accept an idea already embraced in Europe.

Still, a senator from New York signing on to an idea so universally despised by Wall Street is worth raising an eyebrow or two. Hopefully it leads to something more, perhaps even before it’s too late.

If it isn't already.