Thursday, November 19, 2009

Why the US-Swiss-UBS deal is such a travesty

We have already blogged statements by Carl Levin, expressing deep disappointment with the details of the UBS-US-Swiss deal; and a response from GFI. If some of the details may have seemed difficult to get to grips with, this brief video involving Jack Blum, Chairman of TJN-USA, puts the whole thing in wide perspective, in clear and simple terms. Part of the transcript (of Jack talking - Jesselyn Radack is worth listening too) is provided below.


"(Tax havens and tax evasion is) not new. What's new is how easy it became because of the web and the extraordinary sales efforts of large numbers of international financial institutions. . . It typically doesn't require a lot of machination by the individual. There are sales people for these banks, some as we know from the UBS case plied the U.S. vigorously looking for customers. Once they find the customer they set up all the necessary machinery to move the money out of the country and hide it offshore. UBS got caught and we saw the machinery in operation and they held these events: yacht races, art festivals, and they'd bring their salesmen to connect with very rich people.

UBS itself said we're talking about $20bn in assets on which they were earning fees of $200m a year. And the irony of all this is that they made more money over the years involved than they paid in fines. So they were net ahead on this business. The further irony is that the amesty was so set up so that it only looked back six years; some of these customers had been doing it for 20 years and had never paid tax on the money originally earned that went into the account. They came out net ahead after paying penalties and (?) taxes on the past six years."

(On UBS' role in the financial crisis:)

"The really surprising part of his story is that while this was going on, the Federal Reserve bailed out UBS! UBS was in the hole $86bn on bad dealing in US mortgage backed securities. UBS went to the Swiss National Bank and said unless we get a big pile of money - in this case i think it was $50bn or more - we're out of business. The Swiss then came to the Fed and said we need dollars to take care of UBS' problem. The Fed said 'no problem, we'll give you a swap line, unlimited, at the current exchange rate.' That bailed out UBS. No conditions, no turnover of the 52,000 names. Here we are, one central bank to another - at the minimum they should have said '52,000 names - or you can go to the dustbin of banking history.'"

There you have it. It's nothing short of a scandal.

But watch the whole thing: there's more in there, such as the U.S.' shabby treatment of whistleblowers.


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