Schumer’s Ideas: One Awful, One Excellent
It’s Chuck Schumer Day here at FDL News Desk.
Schumer, in addition to smack-talking John Boehner on the debt limit, came out with two policy ideas over the weekend, one abominable and one that has quite a bit of merit. See if you can guess which one got more attention.
The abominable one, of course, because it has to do with terrorism.
Sen. Charles Schumer (D-NY) called on Sunday for a “no-ride” list for Amtrak trains, as a way of preventing potential terrorists from riding the rails.
“Circumstances demand we make adjustments by increasing funding to enhance rail safety and monitoring on commuter rail transit and screening who gets on Amtrak passenger trains, so that we can provide a greater level of security to the public,” Schumer told reporters at a news conference.
The material captured from Osama bin Laden’s compound allegedly stated an aspirational, in-no-way-operational desire to alter the train tracks so a train would derail. Echoing Atrios, exactly how would a terrorist pull that off from inside the train? The tracks represent a much greater opportunity than anything from the train itself, especially if you go by what was considered (and never put into action) in the Al Qaeda plans. In addition, Amtrak isn’t the only train service using those tracks and offering the potential for an attack, so limiting the “no-ride list” to them is particularly useless.
However, to praise Schumer instead of burying him, let me highlight this excellent idea he also released over the weekend.
Sen. Charles Schumer told regulators that sophisticated electronic traders should bear the cost of monitoring their dealings, with special fees assessed to firms that issue and then rapidly cancel securities orders.
The New York Democrat said that such charges could defray the expense of building a new system to track in real time the orders that high-frequency traders pump into U.S. markets, a year after the “flash crash” sent stocks into a 20-minute tailspin.
Sen. Schumer says the proposal would discourage firms from making and then scrapping a barrage of orders.
Regulating HFT will require a lot of oversight, and that has a fixed cost. High frequency traders should absolutely bear that cost, since errors in their trading can and do spill over into the broader stock exchange, as we saw with the flash crash.
Moreover, this sets up a very useful model for a financial transaction tax. A broader version of that tax could raise up to $100 billion annually, if not more, while discouraging the kind of high-frequency, high-risk trades that have the potential to blow up the economy. This is a tax on dangerous actions, and if it works to reduce those actions, it ends up making the country’s financial system safer. And the revenue raised from an FTT wouldn’t only be used to ensure safety and soundness in the financial system, but to pay for worthwhile investments that expand the economy and move the nation away from increasing financialization. You could have the finance sector pay for their own shrinkage in size and influence.
Because that’s such a worthwhile concept, I don’t expect it to happen. But this high-frequency trading tax is a good start.