European media, political leaders, and the citizenry are bashing bankers again, overtly calling them at best accomplices of numerous illegal activities, at worst downright criminals.

The best example of this new wave of anger against bankers is the use of the portmanteau word “bankster” (a combination of banker and gangster), which has become commonplace in media, even in non English-speaking countries.

The term, first coined in the 1930s during the Great Depression and which resurfaced in British media in 2009, appeared on the front page of the French daily Libération on Jul. 18.

Political leaders critical of banks have so far refrained from using the word but everyone else has been having a field day with it.

In a short white paper on banks’ policies released Jul. 21, the head of Germany’s leading opposition Social Democratic Party (SPD), Sigmar Gabriel, accused bankers of “blackmailing governments and states with the (threat) of domino bankruptcy”, of “complicity with criminal activities”, such as tax evasion and money laundering, and of “screwing their own clients”.

Even those commentators who dismissed Gabriel’s banker bashing as political populism agreed that the managers of international private financial corporations have recently done large disservices to their business and their clients.

The list of genuine grievances is long: the HSBC bank is facing accusations in the U.S. of having laundered money for Latin American cocaine cartels and Muslim organisations allegedly involved in terrorist activities.

In a statement released Jul. 17, the HSBC acknowledged, “In the past, (the bank has) sometimes failed to meet the standards that regulators and customers expect. (We) acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong.”

The so-called LIBOR (London interbank offered rate) scandal revealed that numerous leading international banks, including Barclays, Citigroup, JPMorgan Chase, UBS, the Deutsche Bank and, again, the HSBC, conspired to jointly falsify information on the interest rates the banks demand from each other, to lure central banks into reducing their own leading lending rates.

The scandal led to a record 450 million-dollar fine against Barclays, imposed by U.S. and British regulators, and to the forced retirement of Barclays’ CEO, Bob Diamond.

Banks have also been embroiled in massive tax evasion schemes. The independent Tax Justice Network, which investigates international tax evasion and the role of banks in tax havens, estimates that some 11.5 trillion dollars in assets are held illegally in banks’ and funds’ vaults, leading to a global annual loss of tax revenue of about 250 billion dollars.

Similarly, the Organisation for Economic Cooperation and Development (OECD) underlines that “Tax avoidance and tax evasion threaten government revenues,” and recalls U.S. Senate estimates that 100 billion dollars are lost each year due to tax evasion by U.S.-based firms and individuals.

“In many other countries, the sums run into billions of euros,” the OECD says. “This means fewer resources for infrastructure and services such as education and health, lowering standards of living in both developed and developing economies.”

Such assets are held not only in offshore financial centres, such as the British territories of the Isle of Man, Guernsey, and Gibraltar, the Cayman Islands, and the like, but also in banks and funds operating in the city of London, in New York, and in countries like Switzerland, Singapore, and Monaco.

All these crimes have been occurring at a time when states in industrialised countries are facing a dramatic sovereign debt crisis, bringing many to the brink of bankruptcy.

The sovereign debt crisis originated or at least was aggravated after the financial crisis broke out in 2007, precisely because banks had brought themselves to the point of collapse and had to be “bailed out” by states in order to avoid a global financial meltdown.

But the bailout only set in motion a cyclical financial crisis, with Spanish, Greek, and Cypriote banks now demanding rescue from national governments, who are sacrificing their own populations by cutting expenses on crucial public services like education, health, and infrastructure.

And all this is being done so that international financial markets can continue to operate practically unregulated, while the banksters pay themselves princely salaries and massive bonuses.

On Jul. 18, Libération revealed that the four leading French banks alone paid 1.1 billion euros in bonuses to their risk managers in 2011.

The list of banks’ crimes and their employees’ enourmous salaries have led political leaders to urge new regulation and controls on financial markets. The new French minister of finances, Pierre Moscovici, has launched a bank reform, aiming at separating commercial banking from investment banking, and capping salaries.

The SPD’s Gabriel also argued for caps on salaries and bonuses, and for personal liability of bank CEOs and managers in the event of losses caused by highly risky speculative transactions.

Similar measures have been proposed in Britain by the Independent Commission on Banking (ICB), created in 2010 to reform the local banking sector and to promote financial stability and competition.

However, the ICB proposals were not fully considered by the British government’s new plan, announced earlier this month, to restructure the local financial market and which, in any case, will not be implemented until 2019.

This led the ICB chair, distinguished economics professor John Vickers, to complain that the government measures have watered down key parts of his reform package. “International events keep underlining the need for fundamental reform to make banks safer and to shield taxpayers from future risk of loss,” Vickers said in a statement.

Actually, most of the measures discussed in France, Germany, and Britain are included in the so-called Basel III agreement, a banking regulation reform programme triggered by the evidence revealed in the aftermath of the international financial crisis of 2007.

The new regulation, still under debate at the Basel Committee on Banking Supervision, is supposed to be applied step by step starting in 2013, and be fully implemented in 2019.

For independent economists, such delay in establishing new regulation of an obviously rotten industry is proof of the lack of political will among governments to get to the root of the crisis.

“Five years into the worst financial crisis in history, all attempts to regulate banks and funds remain dead letter,” French economist Paul Jorion told IPS. “Despite abundant evidence that (banks and investment funds) cheat all over, again and again, no new rule has been introduced.”

Instead, he added, “the European Union and governments continue to deregulate, pushing their own citizenry into abject misery.”

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Despite the grave financial and sovereign debt crisis sweeping the region, the European Union has once again failed to reach unanimous approval of a proposition made by its executive body, the European Commission (EC), to tax financial transactions in order to reduce speculation and increase state revenues.

British and Swedish rejection of the EC proposal once again condemned the so-called Tobin tax, named after its first advocate, the late U.S. economist James Tobin, to remain a theoretical project with little hope of being enacted.

But under pressure from the French and Austrian governments, and the leading German opposition Social Democratic Party (SPD), ten EU countries agreed to consider the application of the Tobin tax starting in 2014.

The preliminary agreement was reached during a European financial summit late last month, and includes Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovenia, Spain and Cyprus, all of whom pledged to levy a small tax – between 0.01 and 0.2 percent – on all financial transactions, starting in 2014.

The government of Finland also indicated that it might approve the Tobin tax.

Years after a global financial crisis of epic proportions, and following over a decade of debate around the issue, the EU’s inability to pass a common tax on speculation shows the enourmous influence the international finance sector continues to enjoy.

James Tobin, who was honoured in 1981 with the Nobel memorial prize for economic sciences, first published his proposal for a small levy on speculative financial transactions in 1972.

In 1997, in the aftermath of the Mexican and Asian financial crises, the French Association for the Taxation of Financial Transactions and Citizens’ Action (ATTAC), rescued the Tobin tax from oblivion and put it at the top of the agenda to regulate financial markets.

Since then, the tax has been a central theme in academic and political debates, particularly in Europe, so far without any substantial success.

Cautious approval by ten European governments does not mean that the tax will actually be introduced, given that the EU process of approval is extremely cumbersome and time-consuming.

“The Tobin tax in Europe is not for tomorrow,” Margrethe Vestegar, Danish minister of finances, and head of the European council of finance ministers, said at the end of the summit late June.

If at all, the tax will not be put into practice until 2014.

Germany conflicted

Ahead of the June summit, the German SPD put forth an ultimatum: unless the German government agreed to tax financial transactions, the SPD would not approve the proposed fiscal pact – conceived by the conservative government of Angela Merkel to enforce “common” austerity measures across Europe – in parliament.

Under this pressure, the German government finally relaxed its opposition to the Tobin tax, but warned that it would take at least two years to put it into practice.

“The tax won’t be approved in this legislative period,” which ends in late 2013, German minister of finances, Wolfgang Schaeuble, said in a press conference. However, he added that the German government has already budgeted for two billion euros in expected revenue from the Tobin tax for the fiscal year 2014.

Without the SPD support in the Bundestag, the lower house of parliament, the German government would have failed to legalise its blueprint for strict budgetary discipline that it wants to see implemented across Europe in the coming years, in a supposed effort to reduce state deficits and thus solve the sovereign debt crisis.

Failure to pass the corresponding law for the fiscal pact would have meant a tremendous setback for the ‘austerity regime’ conceived in Berlin, which the German government describes as fundamental to restore financial stability across the continent.

“We know that the approval of the Tobin tax in Europe won’t be easy,” according to Andrea Nahles, general secretary of the SPD. “But if the governments of Germany and France, the two strongest economies in the continent, cooperate on this question, they would surely convince those governments still opposing the tax.”

Several new studies suggest that the Tobin tax would not only boost economic growth in Europe, but also substantially increase state revenues.

According to a study by the German Institute for Economic Research, released earlier this month, the tax could generate some 11.2 billion euros in revenues in Germany alone. The study takes into consideration the fact that many banks and investment funds would relocate some of the taxed transactions out of the German financial market.

Another study undertaken by the renowned economists Stephany Griffith-Jones, a professor at Columbia University, and Avinash Persaud, senior fellow with the Caribbean Policy Research Institute, estimated that introducing the Tobin tax in Europe would boost gross domestic product (GDP) in the region by at least 0.25 percent annually.

“Our analysis suggests that the overall positive impact on GDP level could be even higher, as we identify a number of channels through which the tax could encourage a higher level of GDP,” the two economists noted in their paper.

Griffith-Jones told IPS that the tax “would also contribute to reducing the risk of a future crisis. When this is taken into account, you obtain a substantial positive effect on economic growth”.

Additionally, she rejected the repeated argument that such a tax would not be feasible because of evasion or due to its limited application in Europe. “In the past, the same was said about income tax, which is indeed avoided but which still raises a lot of money,” Griffith-Jones stressed.

In the study, the two economists recalled that “one of the oldest and largest financial transaction taxes successfully functions on its own without global imitation” – the so-called stamp duty reserve tax applied in Britain.

Griffith-Jones told IPS, “Since 1986, and before in other guises, the British government has unilaterally, without waiting on others, levied a tax of 0.50 percent on transactions in British equities.”

This tax raises some five billion U.S. dollars per year.

According to the EC’s estimates, released last March, total savings resulting from the introduction of the Tobin tax would amount to 81 billion euros for the period 2014-2020.

European Commissioner for financial programming and budget, Janusz Lewandoski, stressed, “The financial sector does not pay valued added tax (VAT), but has received massive support from taxpayer’s money.”

Therefore, he added, “Taxing the transactions of all financial institutions at rates as low as 0.01 percent is only fair. Furthermore, the estimated revenue that the tax would generate by 2020 can only be welcomed by cash-strapped governments across the EU.”

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