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Mike Bloomberg's Wall Street plan includes taxing stock trades

Bloomberg qualifies for Nevada debate
Bloomberg qualifies for Nevada debate 03:04

Mike Bloomberg, the billionaire financial media mogul and former mayor of New York City who is running for president, has unveiled a plan that he says will curb Wall Street excess — including a tax on stock trades and other financial transactions that takes a page from rival candidate Bernie Sanders. 

The Wall Street plan comes as Bloomberg qualified to appear in his first Democratic presidential debate, thanks to a boost in polls after flooding key TV-market airwaves and social media feeds with hundreds of millions of dollars in campaign ads. He'll share Wednesday night's debate stage in Las Vegas with five other Democrats in the race: Joe Biden, Sanders, Elizabeth Warren, Amy Klobuchar and Pete Buttigieg. 

Bloomberg's proposal to rein in Wall Street may raise some eyebrows, given he advocated against aggressive new regulations that targeted the financial sector back in 2010. At the time, he was serving as New York's mayor as the U.S. economy was regaining its footing following the financial meltdown of 2008. Adding financial regulations, he wrote in a 2010 letter, would be "punitive" and hurt economic growth. 

Bloomberg got his start working on Wall Street as a bond trader in the 1970s and made his billions founding a company that delivers valuable financial data and news to high-priced clients that include the country's largest banks and investment advisers. He had previously opposed taxing financial transactions like stock and bond trades. 

Bloomberg's latest plan, however, focuses on consumers and investors, with the candidate arguing that the economy is still vulnerable to a shock like the 2008 financial crisis. His proposal combines a return to Obama-era priorities, such as strengthening the Consumer Financial Protection Bureau, with a few progressive-leaning ideas, such as the financial transaction tax and capping student loan repayments. 

"President Obama made important progress strengthening our financial system and protecting consumers – but President Trump has spent the last three years gutting those safeguards, while giving a huge tax cut to the wealthiest people," Bloomberg said in a statement. 

Democrats attack Bloomberg ahead of Nevada ca... 09:26

The plan could help Bloomberg counter the view that he's cozy with Wall Street, said Keefe Bruyette & Woods analyst Brian Gardner in a research note. After all: Bloomberg LP's biggest clients are the world's largest financial services companies. 

Still, other analysts said his proposal was middle-of-the-road when it comes to Democrats' plans for Wall Street.

"This appears to be a mainstream Democratic plan for big banks and Wall Street," wrote Jaret Seiberg at Cowen & Co. "It does not go as far as what [Senators] Bernie Sanders and Elizabeth Warren are advocating, but it also is not as moderate as some in the market might expect from Bloomberg."

Bloomberg vs. Sanders

The financial transaction tax is similar to a 2019 proposal from Sanders, the Vermont independent, who says the funds could be used to pay for health care and free college. Under his plan, any stocks traded would be taxed at a rate of 0.5%, bonds at 0.1% and derivatives at 0.005%. That means selling $1,000 of stock would incur a tax of $5. 

Such a tax could conservatively raise tens of billions of dollars per year, with the Congressional Budget Office estimating the potential revenue at $776 billion over a decade. 

Bloomberg's plan differs by proposing a 0.1% tax on all financial transactions. In other words, selling $1,000 worth of stock, bonds or any other financial assets would result in a tax of $1. The revenue created by the tax would be used to "address wealth inequality" and support measures such as a speed limit on computerized trading that can stock wild swings in the markets, the Bloomberg campaign said. 

To be sure, a tax on financial transactions isn't a new idea. Dozens of similar proposals emerged in the wake of the 2008 financial crisis. It's also not very radical, given that the U.S. relied on a transaction tax from 1914 until 1966, when it was eliminated as part of a broader tax cut, and even today countries including the U.K. and France employ similar taxes.

Volcker Rule

Bloomberg's other Wall Street proposals include strengthening the Volcker Rule, which restricts banks that benefit from federal deposit insurance from making speculative investments in vehicles like hedge funds. 

He also is proposing to:

  • Create a "dedicated corporate crime group at the Department of Justice" as well as encouraging prosecutors to pursue individuals for financial infractions as well as corporations.
  • Merge Fannie Mae and Freddie Mac into one government-owned home-mortgage guarantor. 
  • Bolster the federal Consumer Financial Protection Bureau, including adding auto lending and credit reporting services to its portfolio. Critics including Bloomberg have contended that President Trump has weakened the agency. 
  • Cap student loan repayments at no more than 5% of disposable income. 
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