German Government Wants Regulation of Over-the-Counter Trading

May 21, 2010 (LPAC)—In what is certain to stir up more hysteria in the City of London, German Finance Minister Wolfgang Schaeuble called for more far-reaching regulations, in an exclusive interview with the Financial Times taped last night from his Luftwaffe airplane on the flight to Brussels. "I'm convinced the markets are really out of control," he said. "That is why we need really effective regulation, in the sense of creating a properly functioning market mechanism. A market does not function properly if the risks and rewards are completely unbalanced." Schaeuble called for more market transparency, saying, "Given the complexity of modern technology, the individual needs a chance to judge what he is doing. That's why we need standardization of products. And we need transparency for all market participants."

Schaeuble said there was a striking disconnection between financial transactions and economic reality: "We must regulate over-the-counter transactions, and we must also focus on the ratio of financial transactions to the real exchange of goods and services. They bear no relationship to each other. I understand that we need new financial instruments to cope with the huge financial tasks that we face. But, forgive my saying so, minimum profits of 25% are simply unimaginable in the real economy. It isn't healthy."

Schaeuble admitted that the chances of government leaders reaching a global decision on whether to introduce a financial transaction tax at the G20 summit in Canada in June were slim, but said there should be a push for an agreement, if only among European countries. "If we get a Yes, that is good. If we get a No, then we will once again work intensively to see if we cannot have a transaction tax at a European level."

Remarks by German Chancellor Angela Merkel in Berlin Wednesday also took the same direction, when she announced legislative initiatives for "more regulatory steps, also without international coordination."