Congress appears to be gathering support for some form of transaction-based penalty for Wall Street, Traders' James Ramage reports.  SIFMA reiterates its opposition, essentially asking who's it going to hurt?  Investors, that's who. 

Sen. Bernie Sanders (I-VT) in an interview last week on PBS NewsHour mentioned the need for a "transaction fee on Wall Street," when asked about how to rein in the growing U.S. deficit.  "Want to know a way to raise money?  Put a transaction fee on Wall Street, so maybe we can curb some of the speculation and raise some money."  Sen. Sanders, who caucuses with the Democrats and is a member of the Senate Budget Committee, declined to elaborate on what such a transaction fee should entail.

However, any legislation Sanders supports will likely resemble the December 2009 bill Sen. Tom Harkin (D-ID) submitted - Bill SB 2927, the Wall Street Fair Share Act, that called for a 25bp transaction tax applied to a broader class of derivatives and would offer different tax exemptions.  Sen Sanders co-sponsored the bill, which was read twice, then referred to the Committee on Finance, where it stalled.

Last year Sen. Michael Crapo (R-ID), a member of the Senate Banking Committee, said he saw no chance for a securities-related tax before the November elections - but added the need to finance the federal deficit would keep the transaction tax on legislators' radars as a potential way to raise revenues.

    SIFMA's Opposition.   SIFMA said that even without specifics it's opposed to the idea of a transaction tax. A transaction tax on investors and investments that would take capital out of the system at a time when the U.S. economy is trying to grow and create jobs is a bad move.  What's more, a transaction tax imposed solely in the U.S. will drive offshore the capital that's sorely needed for economic growth and job creation.

In a worst case scenario, industry experts estimate, a tax of 10-to-25 basis points on each securities transaction, as has been proposed, would dramatically increase trading costs, widen bid-ask spreads, kill off high-frequency market-making firms, slash volumes and move trading to overseas markets.   For further details, go to:   [TradersMagazine, 2/22, "SIFMA Reiterates..."]