The chairman of Britain’s Financial Services Authority (similar to our SEC), Lord Turner, yesterday floated the idea of a global tax on financial transactions to shrink “a swollen financial sector,” the FT reports.

Turner admits that “the problem of getting global agreement will be very difficult. But at least proposals for special financial sector taxes, with increased capital requirements, address the issue of excessive profits.”

The Lord’s suggestion sounds similar to that of New York’s 2005 mayoral candidate, Freddy Ferrer, to impose a new tax on stock transactions. Ferrer’s proposal was rightly dismissed as killing New York’s main industry.

This idea of a global tax on finance shows how the nation’s important financial sectors continue to flail about when it comes to the right solution to regulating Wall Street — and how America still has a chance to get it right and win.

We don’t need a global tax on financial transactions, which wouldn’t discriminate between good creativity and recklessness.

We just need reasonable limits on borrowing, reasonable disclosure rules, and a way for failed financial firms actually to fail. If America figures this out before Britain does and then does it, we’ll be ahead.

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