It's remarkable, the amount of stupid ideas that emanate from Washington, D.C. I like today's article in the New York Post, "Crippling stox-trade tax is DC's dopiest idea of 2009."
It's a brief story, a few hundred words, about plans to tax stock trades. The story was written by a New York-based hedge fund manager, Jonathon Trugman, who has been quoted in the press once or twice about the politics of fiscal and monetary policy. After all, changes to tax law that will come out of D.C. run by such a leftie régime will obviously have ramifications for private clients, and not just for small businesses. (Small broker/dealers have been worried they'll get bled dry by regulatory activity meant to protect retail investors.)
Even our hero (yes, still) Burton G. Malkiel, the Princeton University economics professor who authored the great book, "A Random Walk Down Wall Street," weighed in on the matter, by writing an op for today's WSJ. He co-authored it with George Sauter, managing director and chief investment officer at Vanguard Group. The opinion piece says, "Let Wall Street Pay for the Restoration of Main Street Act" would have unintended consequences and would hurt long-term investors. It would dampen market liquidity, too. Malkiel . "It is hard to imagine a piece of legislation that would have more damaging unintended consequences," they write.
The two write: "Proponents of a transactions tax misunderstand the way markets work. The bubble in home prices in the United States was not caused by the rapid buying and selling of individual family homes. The financial crisis was primarily a liquidity crisis and a credit crunch, and the major problem with collateralized mortgage-backed bonds was that they declined significantly in value and became illiquid. A transactions tax that would have reduced trading and made repurchase agreements more costly, could have made the problem even worse."