Greed Gone Wild

 

Greed Gone Wild, A Banking Story of a Different Kind

04/05/2023

It amazed me (but probably shouldn’t have) when Congresspersons and other ignoramuses eagerly leapt on the “Woke” train to blame Silicon Valley Bank’s crisis on issues far more mundane and totally unrelated to any remotely “woke” issues (The woke Federal reserve system? Woke low interest Treasury bills? Spare me) 

And I had a revelation last night. MTG has been somewhat quiet on this issue because she doesn’t even understand how commercial banks work.

There, with that out of the way, the next phase of woke slinging may well be to, in some alternate Universe, tie the SVB problems to the recently announced bailout of Credit Suisse. For the uninitiated, Credit Suisse for years, protected by Swiss banking shields which were based on denying any outside access to depositor data, thrived by being the overseas cache for rich Americans to shield their money from rightful owed taxation. In a 2014 plea agreement with the US, CS (I’m tired of typing the whole name, deal with it) copped to illegally shielding more than $12 billion in assets for wealthy Americans, agreed to stop doing it, and paid a compensatory “fine” of $2.7 million. What was missing from the settlement were the names of most of the US tax scofflaws. By early 2014, before it struck its plea deal that May, Credit Suisse had only divulged information on some 238 out of 22,000 U.S. clients. Again, admitting what they did and that it was illegal. But not who they did it for.

That was 2014. The next administration had little or no interest in white collar crime, seeing as how the President himself was a white-collar crook and had been for years.

The current financial crisis at CS boiled over last week when the bank announced "material weaknesses" in its financial reporting. Before shouting “woke,” and blaming the SVB collapse, however, US legislators would do well to consider that the CS troubles started long before that, with a series of financial and political scandals that hit the bank's reputation and bottom line hard. In the last two years alone, the bank's stock has fallen by more than 80%. It’s hard to think of any corporation which would survive an 80% drop off in value, especially since it was the own doing by shoddy and illegal practices.  CS’s reputation has taken a number of huge hits in recent years, including being linked to a money laundering operation involving a cocaine trafficking ring in Bulgaria, and hiring detectives to spy on an executive who left to work at a rival bank. Seems they just can’t live within the law, huh? To aggravate matters more, even though in February of 2014 following the huge fine and settlement, Credit Suisse’s chief executive at the time, Brady Dougan, told lawmakers at a hearing that the bank had cleaned up so that it only did business with clients who were in compliance with tax laws.

So that’s that, huh? Not exactly. Some months after the plea deal was inked and CS promised to play fair, a whistleblower, through his lawyer, provided some troubling facts.

In an interview, the whistle-blower’s lawyer, said that after the plea deal was signed and as Credit Suisse awaited its final sentencing, he told officials at the tax division of the Justice Department and federal prosecutors who had worked on the case that his client had information that the bank had continued to cloak money held by some U.S. account holders. He gave them one name in particular — Dan Horsky, a retired business professor, who lived in Rochester, N.Y. The following year, federal agents arrested Mr. Horsky, who had amassed a $200 million untaxed fortune and hidden it with the help of Credit Suisse bankers, using offshore shell companies. This from court transcripts and Horsky’s admission under oath. The arrangement lasted for months after the bank signed its plea deal.

Horsky plead out, and in 2017 was sentenced to just 7 months in prison after promising to cooperate fully with prosecutors. The whistleblower, assuming he lives to collect it, could be richly rewarded if US prosecutors move to impose more fines on CS. Under an I.R.S. rule, whistle blowers can get as much as 30 percent of the amount of any additional money the government gets. And, his attorney said, the whistle blower has more names of American accountholders beyond Mr. Horsky’s, although he wouldn’t say how many.

 

Switzerland has been one of the largest offshore financial centers and tax havens in the world since the mid-20th century. Despite an international effort push to meaningfully roll back banking secrecy laws in the country, Swiss social and political forces have minimized and reverted much of proposed rollbacks. Although disclosing criminal activities by banks, who do not enjoy a good reputation even in Switzerland, is generally well seen by the Swiss public, disclosing client information has been prosecuted as a criminal offence since the early 1900s. Employees working in Switzerland and abroad at Swiss banks have been advised to adhere to an unwritten code similar to that observed by doctors or priests". Since 1934, banking secrecy laws have been violated by only four people.

Starting as a way to protect wealthy European banking interests, Swiss banking secrecy was codified in 1934 with the passage of the Federal Act on Banks and Savings Banks. These laws, which were used to protect assets of persons being persecuted by Nazi authorities, have also been used by people and institutions seeking to illegally evade taxes, hide assets, or generally commit financial crime.

This bank failure is so unlike SVB that to even compare them is ludicrous, but someone will do it and maybe even blame the SVB collapse for triggering the Credit Suisse collapse which was already imminent due to their own illegal banking practices. And bet on it that some of those American tax scofflaws are well, known and politically active. CS has been bought out by their largest competitor.  Under the deal, UBS Group AG will buy Credit Suisse for more than $3 billion in an all stock deal. How they will handle the deposits and practices of CS remains to be seen. Either way SVB is unrelated to the decline and fall of this crooked Swiss Bank, so save your “woke.”  SVB was due to poor economic investment management and unforeseen FED actions, Credit Suisse was more like a record of criminal conspiracy which had damaged the value of their brand to the point that any global banking concern was the straw, and they were the camel.