September 23, 2021

‘Robin Hood’ Trading Tax Nudged Forward in Europe

BRUSSELS — A hotly contested tax on financial trades took a major step forward on Tuesday when European Union finance ministers allowed a vanguard of member states to proceed with the plan.

The so-called Robin Hood tax would apply a levy to trading in stocks, bonds and derivatives, complex financial products tied to underlying assets like oil prices or interest rates. Although the tax would probably be small — one-tenth of a percentage point or less on the value of a trade — it could earn billions of euros for cash-strapped European governments.

Algirdas Semeta, the European commissioner in charge of tax policy, called the decision “a major milestone in tax history” and said the levy could be imposed from next year. But deep concerns about how the initiative would work in practice still could mean delays.

The European Commission, the Union’s policy-making arm, will still need to draft the final legislation and the states in favor of the law will have to give their unanimous approval before it becomes law in the eleven countries that have agreed to send the proposal forward — two more than the minimum required for legislation to be drafted.

A significant complication is stiff opposition to the tax by Britain, which has the largest trading hub in Europe in the City of London. But because Britain has decided to stay outside the group of states applying the tax, its resistance probably would not stop the plan from moving ahead.

The session Tuesday was the second day of a meeting that began here Monday with a session by the Eurogroup of ministers from the 17 members of the euro zone. On Monday evening, in a nearly unanimous vote, the Eurogroup elected Jeroen Dijsselbloem, the Dutch finance minister, to be its new president.

Mr. Dijsselbloem, 46, a social democrat, has been finance minister of the Netherlands for only three months. In the Eurogroup, he succeeded Jean-Claude Juncker, the prime minister of Luxembourg, who had held the post since 2005 and announced his intention to step down last year.

The only formal opposition came from Luis de Guindos, the Spanish finance minister, who said his country and others with comparatively vulnerable economies — compared with those like Germany and the Netherlands — did not hold enough top jobs in the Union’s institutions.

At a news conference late Monday, Mr. Dijsselbloem emphasized the need to ease mistrust between Southern and Northern European countries over austerity policies, which many experts say have worsened economic pain in countries like Spain but have done too little to resolve the euro zone’s problems.

As for the proposed tax on financial transactions, among the 27 members of the full European Union it has firm backing from Germany, France and nine other countries. Others might still eventually support the proposal, which is an idea closely associated with James Tobin, a U.S. economist and Nobel laureate who suggested a version of it in the 1970s.

Britain, as well as Malta, Luxembourg and the Czech Republic, abstained from the vote on Tuesday.

Although Britain would not be required to assess the tax because of a special European procedure allowing it to opt-out, the law still could have an effect on its financial sector by raising the costs of transactions that also involve institutions based inside the tax zone.

The decision to move forward with the tax was “regrettable and likely to serve as another brake on economic growth,” Richard Middleton, a managing director at the Association for Financial Markets in Europe, an industry group based in London, said on Tuesday.

Backers of the tax originally expected the proceeds to go to humanitarian and environmental causes. But the debt crisis that exploded three years ago and the meltdown in the banking sector have adjusted priorities. Nowadays governments are keener to use the revenue to help prop up shaky banks and help finance the budget for running the Union.

The initiative could generate about €57 billion annually, or about 0.5 percent of E.U. output, if it were applied across the entire bloc, according to the European Commission. But that amount is likely to be significantly less without Britain’s participation.

The next stage is for Mr. Semeta, the European tax commissioner, to propose legislation. He has already suggested a levy of 0.1 percent of the value of stocks and bonds traded, and of 0.01 percent of the value of derivatives trades.

One challenge is formulating the law so it does not prompt traders to move to non-taxed jurisdictions.

Another is deciding who pays the tax when traders in cities like Frankfurt and Paris, where the tax would apply, conduct business with traders in cities like London or New York, where it would not.

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Cultural Studies: Hurricane Sandy Reveals a Life Unplugged

If they wanted to talk to a friend, they had to do it in person. If their first post-storm instincts were to check a weather app, they resigned themselves to battery-run radios.

As the full scope of the storm’s damage became obvious, it was clear these inconveniences were hardly grave. And because most children, and adults, eventually found some kind of connection via an unaffected neighbor (or Starbucks), the withdrawal was often more of a tech diet than a total fast.

But the storm provided a rare glimpse of a life lived offline. It drove some children crazy, while others managed to embrace the experience of a digital slowdown. It also produced some unexpected ammunition for parents already eager to curb the digital obsessions of their children.

Early this year, when Michelle Obama revealed rather draconian rules about technology for her daughters (no TV, cellphones or computers during the week except for homework), Pam Abel Davis of South Orange, N.J., used the news to threaten her tech-addled children with Obama-esque regulations. “My son in first grade signed a pledge for ‘TV turnoff’ during the week to win a gold medal,” said Ms. Davis, a senior program officer at the Robin Hood Foundation. “But it was too much. He said, ‘Mom, let’s just go for the silver.’ ”

The storm hit Ms. Davis’s neighborhood hard but spared her home, which became a charging station for friends of her daughter, Lucy Reynal, 13. Then last Sunday, electricity was shut off while fallen trees were cleared from the road, and within minutes the house emptied out, no longer useful to the teenage power vultures.

“Lucy almost had a heart attack when the Wi-Fi went down, until she saw pictures of the devastation all around us,” Ms. Davis said. “I had just bought a hand-cranked phone charger, thinking it would be a kitschy Hanukkah gift. We were winding it ferociously, sweating and running out of breath.”

Hegemony over the car adapter that provided precious power resembled a scene from “Lord of the Flies,” according to Gail Horwood of Scarsdale, N.Y., an executive at a consumer health care company. Bridget, 15, and Lila, 11, unearthed every ancient defunct flip phone in the family’s past and tried to arrange sleepovers where they could recharge. There was a throwback moment: Lila had to study for a test of state capitals, so as the lights were flickering just before the blackout, she found a childhood jigsaw puzzle of the United States. But any resourceful return to old-school methods were not expected to last.

“Not a chance,” Ms. Horwood said. “It’s a digital world, and they live in it.”

The Zanders of South Salem, N.Y., experienced a blackout last year, “so we’re getting good at the 1800s in our house,” said Lauren Handel Zander, who runs an executive life-coaching company. Her three children “live for Mommy’s iPad,” she said, likening the first days of the blackout to rehab. “It’s like coming off drugs,” she said. “There’s a 48-hour withdrawal until they’re not asking about the TV every other minute.”

The Zander children did enjoy the unusual undivided attention of a working mom. “Mommy got parked,” Ms. Zander said ruefully. “I’m not as ‘on’ if my kid is attached to one of those devices. I played Clue. I haven’t played Clue in a very long time. We got to hang out more, which was an entire family adjustment, but it’s a good problem to have.”

Among the parents who spoke with pride about newfound family time when their children were forced offline, there were honest admissions about the joy-kill of too much bonding. One 10-year-old boy in Lower Manhattan sweetly told his mother, “This gives us a chance to talk.” After three hours of “and that’s why they need to ditch Sanchez and make Tebow the starter,” she was silently pleading for someone to turn the power on.

“For the first three days, I was full of maternal pride,” said Marjorie Ingall, a writer in the East Village. “’Look at my children: reading by candlelight, cutting out paper dolls, engaged in such brilliant imaginative play. We are so ‘Little House on the Prairie.’ Then Day 3 hit and the charm of screenless togetherness wore off. I was genuinely concerned that we were all going to kill each other.”

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DealBook: Madoff Case Is Paying Off for Trustee ($850 an Hour)

Irving H. Picard, the trustee for the victims of Bernard L. Madoff's fraud.Ruth Fremson/The New York TimesIrving H. Picard, the trustee for the victims of Bernard L. Madof’s fraud.

Irving H. Picard, the court-appointed trustee seeking to recover funds for the victims of Bernard L. Madoff’s multibillion-dollar Ponzi scheme, has been described as a modern-day Robin Hood. For nearly four years, he has been working to pay back those who were swindled by Mr. Madoff, some who lost their entire life savings.

Yet a look at recent court filings shows Mr. Picard has had much more success collecting money for himself and a dozen law firms and consultants than any victim of Mr. Madoff’s crime.

So far, Mr. Picard’s efforts have created a whopping $554 million in legal and other fees. How much have Mr. Madoff’s victims actually received from all of the cases and motions he’s made? Only $330 million. And how much does Mr. Picard estimate the fee spigot will pour out by 2014? A mere $1 billion.

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At $850 an hour, Mr. Picard and his law firm, Baker Hostetler, are starting to look more like the princes of the Full Employment Act for Lawyers than storybook heroes.

In the last several years, Mr. Picard has brought more than 1,000 cases seeking more than $100 billion on behalf of victims, despite acknowledging that only about $17.3 billion had actually been invested by customers. (The entire Ponzi scheme has been estimated to be worth $65 billion, but much of that is the result of made-up profits recorded by Mr. Madoff.)

Mr. Picard’s admirers cheered him on as he accused banks and other financial firms of aiding and abetting Mr. Madoff or willfully turning a blind eye to evidence that he was operating a fraud. Yet look what happened to many of those cases: judges tossed out a vast majority of the claims — some $90 billion worth.

Judge Jed S. Rakoff of United States District Court in Manhattan threw out Mr. Picard’s $60 billion racketeering suit against UniCredit in February, describing some of the claims in the case as “paltry, and otherwise unexceptional.” In another ruling, Judge Rakoff rejected a case against HSBC, calling it “convoluted.” He said he was “mystified” by some of Mr. Picard’s arguments.

Another district court judge, Colleen McMahon, decided against Mr. Picard’s most aggressive claims in a $20 billion case brought against JPMorgan Chase, saying plainly: “The trustee’s theories fail.”

According to a Government Accountability Office report quoting the Securities Investor Protection Corporation, which hired Mr. Picard as the bankruptcy trustee, it is unlikely he will be able to pay back Mr. Madoff’s customers the $17.3 billion that he had said was his goal, let alone the $100 billion he originally sought. Indeed, at the rate he’s going, he would be lucky to return more than half of the $17.3 billion.

A spokeswoman for Mr. Picard did not make him available for an interview.

In fairness to Mr. Picard, he has been successful in seeking to claw back money from “net winners” — investors who walked away with more money than they started with — so he can pay the “net losers.” Among the net winners with whom he has reached settlements is the Wilpon family, which controls the New York Mets.

Thus far, he has reached settlement deals worth some $9 billion. He has delivered only $330 million to Mr. Madoff’s victims, however, because so many of those settlements are being challenged in court. It is unclear whether some of the settlements, which have been approved by a bankruptcy judge but are being challenged by others on appeal, will hold up. In a statement on the trustee’s Web site, Mr. Picard said he was “confident that the appeals on these settlements will fail, as they already have on several occasions.”

Meanwhile, the legal fees keep piling up. Although the fees have been approved by the bankruptcy court, Judge Rakoff and others have raised questions about the growing payday.

In a particularly caustic exchange in court last year, Judge Rakoff, upon seeing a group of lawyers enter the courtroom on behalf of the trustee, said: “Can I ask a question, which is, since the trustee’s fees come out of the funds that otherwise would be available for other purposes, why are there four attorneys from the trustee here in court today?”

When the lead lawyer responded that he might need to consult with his colleagues during his argument, Judge Rakoff shot back sarcastically: “If it turns out you give your argument without needing to consult with them, of course, you and your firm won’t charge for their appearance today.”

The lawyer replied: “I, your Honor, am not going to make any promises.”

Helen Davis Chaitman, a lawyer with Becker Poliakoff who has been fighting Mr. Picard on behalf of some net winners of Mr. Madoff’s crime, famously told The New York Daily News: “Picard is going to wind up being richer than Madoff.”

That may be hyperbole — Mr. Picard has personally taken home only $5.1 million, according to court documents — but the total fee numbers are staggering.

There is good news, at least sort of: the fees do not come out of the hide of the Mr. Madoff’s victims. They are paid from a fund overseen by SIPC, which provides a form of protection for investors against losses that arise when a broker-dealer fails. The nonprofit group is supported by charges paid by its broker-dealer members, but the cost of those charges is most likely passed on to customers.

“Not one penny of recovered customer money is used to pay any of the legal fees and expenses incurred by the SIPA trustee,” according to the trustee, who was referring to the Securities Investor Protection Act that mandated the SIPC system.

A spokeswoman for Mr. Picard defended his work and his fees saying: “Given the extraordinarily complex factual and legal issues confronting the SIPA trustee, his success is unmatched by any other fiduciary. That success emanates from the fact that — notwithstanding the relentless attacks by some of the world’s leading law firms supported without reservation by their deep-pocket clients — the necessary resources have been provided to the SIPA trustee via SIPC from its securities industry fund, thus allowing him to recover over $7 million a day for the victims since he was appointed SIPA trustee in December of 2008.”

That $7 million a day figure, by the way, assumes that every dollar he collected will be paid out to Mr. Madoff’s victims, which is unlikely.

Nobody is asking Mr. Picard or his legal team to do all this work pro bono. But given the amount of money at stake and the epic size of the crime, one would hope that he would have pursued a more effective legal strategy that would have made a lot more money for the victims than the lawyers.

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