Finance should once again support the real economy of goods and services.

I spent 22 years in the financial services business. Beginning in the 1980s, I worked at exchanges where we traded everything from futures on soybeans to shares of stock to options on interest rates. During these boom years for the U.S. and global financial markets, traders and Wall Street executives earned fortunes.

Financial asset trading grew faster than the real economy -- and even came to dominate it. Consider these key indicators: The typical period that an investor or financial institution owned specific stocks dropped from four years to four months. The value of annual stock market trading soared from less than 20 percent of our economy to more than 200 percent. Financial profits reached almost 45 percent of total business profits. And financial sector compensation went from being less than twice the average for U.S. workers to over five times the norm. The compensation packages showered on financial executives dwarfed anything ever seen before.

But the nation's economy -- and most Americans -- didn't benefit very much.



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The financial boom also triggered many busts. The tech bubble burst, the housing bubble deflated, and then, finally, we fell off that cliff when the financial industry's reckless speculation ushered in the Great Recession and today's economic stagnation.

Too many members of our economic and political elite have forgotten what finance is actually supposed to do: efficiently raise and allocate capital for investment. Instead, today's financial markets operate like casinos. High-speed trading dominates, and short-term speculation drives both day-to-day actions and long-term planning.

We must reduce the role of finance so that it once again supports the real economy of goods and services, rather than playing its master. Following years of neglect, we have huge needs for investment in our physical and social infrastructure.

Fortunately, we can meet these two daunting challenges with one simple step: the Robin Hood tax. If we levy a tiny tax on every financial transaction, we can steer the financial industry away from the casino and back to a more productive role.

Although this would require a very small tax -- a fraction of a percentage -- on every trade, the Robin Hood tax would reap enormous benefits. First, it would reduce speculative activity, including the high-speed trading that now jeopardizes our markets. Second, if it were levied on all trades involving financial assets and derivatives, it would raise a large amount of money -- as much as $300 billion annually.

Will a Robin Hood tax hurt small investors or the majority of Americans? Not at all. This tax is levied only on trades. Since small investors hold stocks and other financial assets for the long run, the tax would have virtually no impact on them.

But will it make our markets less competitive? Again, no. The U.K. and Hong Kong have a similar "stamp duty," Switzerland's got a "transfer tax," and other countries have already begun to collect similar taxes without hurting the ability of their markets to perform their key functions of raising and allocating money. Germany, France, and other European nations are on the brink of adopting a financial transactions tax too.

It's time for Robin Hood to sound his horn in the United States.