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Hot Money
A few years ago the issue of Americans with Swiss banking accounts
exploded onto the headlines. The US Justice Department held no prisoners
in its effort expose and resolve the problem. It nearly crippled UBS in
the process. It ended with changes in Swiss law.
The consequence has been that NO US PERSON can open
account outside the United States without agreeing in advance that every
aspect of the account will be reported to the IRS. The door is closed
for hot money outside the USA. That is a very positive development.
Every country should follow the shining example of the USA. We have set a
new standard for disclosure. The world would be a better place if
American standards and practices were followed around the globe.
But there is one aspect to this puzzle that has bugged me for the last few years. My question is;
“What
happened to the 2/9/2009 letter addressed to Treasury Secretary Tim
Geithner from the Mexican Finance Minster, Agustin Carstens, requesting
information from the US banks on accounts maintained by Mexican
nationals in US banks?”
Back in 09 Time magazine had a story on this titled, “Foreign Tax Cheats Find U.S. Banks a Safe Haven”. From that article:
the
U.S. effectively serves the role of Switzerland for Mexico, which
suffers from rampant tax evasion.. Much of the estimated $42 billion a
year of illicit funds flowing out of Mexico each year (not including
drug cartel money) ends up in U.S. banks
The letter from the Mexican finance minister seems straight forward enough:
"The
exchange of information on interest paid by banks will certainly provide
us with a powerful tool to detect, prevent and control tax evasion, money laundering, terrorist financing, drug trafficking and organized crime,"
Who could argue with a proposal that would accomplish all those
worthwhile goals? The language from the IRS on reporting interest income
on foreign account holders is the problem:
Interest on Deposits
Generally, no withholding (or reporting) is required on interest
paid to foreign persons on deposits if such interest is not effectively
connected with the conduct of a trade or business in the United States.
For this purpose, the term "deposits" means amounts that are on deposit
with a U.S. bank, savings and loan association, credit union, or similar
institution, and from certain deposits with an insurance company.
In May of this year Switzerland
signed tax treaties with a number of neighboring EU countries. UBS lost
$40b worth of deposits as a result. The other public and private Swiss
banks lost deposits as well. One can assume that US banks would suffer
from similar withdrawals of foreign money should America follow
Switzerland’s example.
I am left wondering what happened to the Mexican letter to Geithner. I
can’t trace a resolution to Mexico’s formal request. If anyone reading
this can point me to how this was resolved, I would appreciate it. If it
wasn’t resolved, and the US is still a safe haven for hot money I have
to ask; Why?
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Bruce, I have to really disagree with you on this one. I don't see why I should be obligated to tell the IRS anything about any offshore bank accounts I or anyone else has.
Our drug dealers used to hide their money in banana republics' banks like Panama, now their drug dealers hide their money in our banana republic's banks, how fitting.
Thanks Bruce, great point, your posts are always informative.
By the way, an empire's domestic rules are never might to be applied fairly and equally to others outside the empire.
Huh?
I guess this is why my Mexican friends are allowed to open accounts at BoA with no SS.
After all the discussion on sarcasm I feel foolish asking if the last line was a rhetorical question. lol.
Great picture! All that green in circulation could bump the CPI rate a smidge. Do you think the Treasury would have it burned or recycled.
it's a stupid graph because they should be indexed to emphasize the delta. but, yes, point taken.
Bruce,
To get a better understanding of Criminal Enterprise albeit virtually, you can get a great instructional tool for your PC called:
GTA: Vice City
http://www.rockstargames.com/vicecity/pc/
It's old and cheap (like 5$ on amazon)... It will help you understand the darker parts of the world that surrounds you.
In the game every business looks legit until you attain a high enough level... Then you can "buy in" to the "real" action.
Great game... Fantastic Soundtrack... I still have the tunes from it somewhere.
Once you complete the missions and end up as a master criminal... You become enlightened as to how say Ben B. might think about the world as there is nothing left to do but cause great deals of chaos and rake in money.
I have to ask; Why?
Because we are all in bed together.
What do they say about it when you can't tell where the criminal enterprise ends and the legitimate enterprise starts?
Where you beeeen mang?
We ARE a Gangster Nation
http://www.youtube.com/watch?v=CoNQ70kK-5c
This game right here is rough as fuck
These ho's out here about the bucks
These fools out here afraid to bust
I have no fear, afraid of what
And in five beers I'm comin' up
Fools talk real loud but don't run up
When we come through they run and duck
We still right here so what the fuck
This IS Ben and Timmay's Theme Song.
.
Maybe Bruce needs to start using the "SarcMark," which is a fee-based symbol, to inform folks who lack the "irony Nodule," which is located in the right parahippocampal gyrus, that he is actively being satirical. Or, he could write in Ethiopian, which already has a symbol for sarcasm.
What ever happened to those sixty thousand plus folks with Swiss bank accouts that hadn't declared them? So far only two were jailed. Mr. Madoff and the bank employee that sent the list to the U.S. Congress.
I know of one who croaked in 2009 with $10 million @ UBS. The IRS grabbed $8 mil right away -- by the time his estate settles, they'll have grabbed the rest. Death is taxes, folks -- believe it.
Bruce, I think there is a huge inability to detect bitter irony in this particular ZH neighborhood today. Maybe you're going to have to put the /sarcasm tag training wheels on.
I am going to jump off a bridge instead...
Are you really going to jump off a bridge?
Or was that a metaphor expressing frustration?
Your writing confuses me, I never know how to take it.
Florida Keys highly recommended for this venture. Low Bridges, 85 degree water...
Take your noodle, just in case.
.
Blurring the line between shit and shinola. No thanks.
Here's how the Mexican letter to Geithner was resolved, Bruce.
www.usasaysfuckutomexico.com
All you pesos is ours.....Feliz Navidad, Timmy.
"The world would be a better place if American standards and practices were followed around the globe."
Ahahahahha. Yeah, sure, bomb a few people, withdraw human rights, etc. etc.
Bruce, Bruce, Bruce, what am I going to do with you. How could you seem to be so intellegent and yet still be such a raving idiot. This statement is just too much:
You think that just because you are a tax slave of the federal government and it's pimp the IRS that the rest of the world should be sentenced to the same fate. Do you even realize that financial privacy is a critical component of freedom? What a tool. I don't know where you come up with this drivel, but I am starting to think that you must somehow be one of their minions.
sarcasm babe. sarcasm.
Sarcasm is very hard to pull off in blog post or a comment. If it is sarcasm, then you fooled me. However lately you have gone very wobbly on tax cuts. Rapacious tax levels are also a symptom of a slave state.
ConfederateH,
You have to read the blog and THINK about what he has said relative to the rest of his posting.
Perhaps you should demand a refund on the money you pay for his opinion.
I'm wondering if I should feel like an inadequate coon? I don't have enough money that this presents a problem...
One less problem, one less cross, ese.
Talk about hyprocasy. How many remember how the Nixon Watergate scandel was financed ? Through US$s sent to Mexico as a laundering scheme. Follow the money and it reveals a great deal
It's all part of how we benefit from seignorage on the world's reserve currency. The picture you've posted illustrates the extent to which the U.S. government is the silent partner of every druglord, arms smuggler, sex slave trader, and corrupt politician around the globe. Of the $900+ billion of FRNs in circulation, at least half remain permanently outside the U.S., constituting a free loan to Uncle Sam by the world's criminal class. How easy it would be for the U.S. to follow the lead of other fiat currency issuers and require cash hoarders to periodically exchange their old paper for new bills -- and how very unprofitable! Gold would hit $5K in a heartbeat. Instead, in 1996 when the hundred dollar bill was re-designed, the Treasury went to elaborate lengths to assure all its unacknowledged co-conspirators that the old hundred dollar note would remain legal tender "in perpetuity," thus sparing them the awkwardness of having to show up at a bank with duffel bags of blood-stained bills. Watch for the same thing to happen in 2011 when the next "counterfeit-proof" Benjamin is introduced.
The new $100 bill has been delayed. It may be that they are changing the plates; inserting a likeness of Obama and adding a few more zeroes.
If we must add a new face then my vote is for Gideon Gono, the Living Legend!
Yeah it's great that normal citizens can't open foreign accounts. If memory serves basically no foreign banking system is will to touch us leprous Americans. What a crime it would be if we could put some assets outside the reach of Uncle Sugar. After all if one happens to born inside the US it means that no matter what you cannot leave their tax grid unless their able to jump through the hoops of getting rid of the mark of financial sin.
I have no idea about the mexican request.But regarding the Swiss disclosure treaty, I recently heard a bit of anectdotal evidence which indicated the Swiss do not intend to make it easy for `authorities` to investigate.
An aquaintance recently re located to Switzerland. He applied to open an account with one of the big name Swiss Banks. An appointment was made with one of their managers. Everything was very straight forward: Pay these standing orders, open current and deposit accounts, ATM card etc etc. My aquaintance had just sold his car, and at the end of the meeting asked the manager to put the proceeds (90,000 euros) into his new account. He handed the manager the cash. "No problem at all" said the manager, and no questions whatsoever were asked about the origins of the money. The manager closed the meeting by offering my aquaintance the opportunity to open one of their new `style accounts`, he explained that his bank was obliged to co operate with investigations into account holders. But he went on to say that the investigation had to be more than a `fishing trip` the enquiry had to ask `does this individual have an account with you? and if so the investigator has to have a fairly accurate idea as to how much money the account holds, otherwise the Bank says " sorry we can not help you, but we can say your information is not accurate" The solution of the `new style account` is to make sure that the ammount in the account is never stationary. It swiches electronically in and out of a number of nominee accounts. A sort of HF withdrawl and deposit mechanism.
No idea if this is completely true - but it made me laugh. I do suspect it has more than a grain of truth though.
In Ferdinand Lips' book The Gold Wars, he discusses the loss of Swiss banking secrecy.
Essentially, it happened once Swiss banks like UBS became true international behemoths (and were earning substantial revenues in the US) started getting serious pressure from Washington, who threatened to shut them out of the US market.
The banks had become sufficiently large to exert pressure on the Swiss government - and they did.
Something of a DERS, or Deposit Electronic Registration System? hehe
What the Swiss did just seems ridiculous now. The Euro is collapsing, the US government is out of control and arguably on the same road toward near-term insolvency yet the Swiss, who are not in the Euro and have a long history of keeping assets safe, sudenly want to impair their ability to provide the service of wealth protection?...in exchange for what? - a pat on the back from the likes of Obama?
You could make a much stronger moral case (Bruce) in favor of Swiss banks helping citizens of other countries protect their wealth before it gets destroyed by their criminal and/or clueless governments. I don't think you can completely escape (nor should you want to) The Economist's maxim that capital goes where it's welcome and stays where it's well treated.
Also, America's problems with Mexicans and Mexican drugs can be solved quickly and easily by border enforcement and some decriminalization of narcotics. I'm pretty sure that creating a money laundering czar and another federal agency won't do anything useful. Besides, the problem with Mexico is Mexico. Clean up your own damn casa Senor Calderon before you come here and lecture us on how the America isn't quite accommodating enough to Mexicans.
The door is closed for hot money outside the USA. That is a very positive development. Every country should follow the shining example of the USA.
Isn't that kind of high-minded assertion dependant upon which party you think is the bigger criminal? What happens when Congress passes a law requiring everyone who is as rich as Bruce Krasting to please mail in 1/2 of your savings to the IRS? (or if (if!...ha-ha) the Fed effectively does likewise by dollar debasement?)
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I still think the Swiss shot themselves in the foot here for no reason and I predict that they will reverse their decision to effectively end anonymous banking very soon.
I am not sure if Bruce was being sarcastic or not but I wouldn't be surprized if he wasn't since obtaining information from expert networks is the same thing in his eyes as having people outside of stores tracking foot traffic.
Give me a break. You can't read this as sarcastic? And your dead wrong with the nonsense about expert networks and counting store traffic. Read what I said. I did not connect counting with insider trading. The fucking SEC and the FBI are doing it though. That was the point of that piece.
Go back and read the comments. Few read it like you.
BK,
The only thing wrong with posting in an unfiltered blog is the volume of comment from people do not want to do the work of entering the discussion but do want to vent anger that may be acquired from totally unrelated personal problems.
I like to think I am of sound mind and the only comment I can make to the subject is; "Thanks for the post."
Come on. Just man-up and admit you had a brain fart. Because there is no sign of sarcasm in your post. The majority of your posts are very useful and appreciated. Everybody makes mistakes...
I think he was making the case that the US has stronh armed for something it is not willing to publicly reciprocate on.
I think.
Bruce is usually pretty straight forward...I'm giving him the benefit of the doubt on this one.
Glad it was sarcasm Bruce...I read it the same way.
"The consequence has been that NO US PERSON can open account outside the United States without agreeing in advance that every aspect of the account will be reported to the IRS. The door is closed for hot money outside the USA. That is a very positive development."
Wages are taxed at earnings...after that it's none of their business if I stick it in a shoe or an offshore account as it has been taxed once already.
I use LOL's & ;-)'s when saying something tongue in cheek/sarcastic etc.
Now I'll have to go back up and finish reading your post cause that quote floored me ;-)
I use LOL's & ;-)'s when saying something tongue in cheek/sarcastic etc.
Oh come on, stop making life easier for earnest Germanic types and humorless dolts of all stripes. Some people simply need to kick up their sarcasm game or employ other literary devices in the service of making a point.
I mostly love BK's stuff and generally he isn't particularly sarcastic -which is just fine-. So, when no obvious exaggeration was employed, articles supporting the general literal meaning of his post were referenced and there wasn't really any taunting or cutting tone to the whole thing, I took it at face value. I thought it was all a bit out of character but I felt compleeled, nay, duty bound by the protocols of my lofty station (yes, that's sarcasm) to punch holes in what appeared to be a straightforward argument.
Mercury, I've seen your comments for some time. You really thought I was serious about the shining example stuff? Those would not be my words, other than in jest. I will re-read the 'writing for clarity' book. Yikes!
Hey, some of us are a little wiped out after the holiday and Lord knows I'm aware that not quite hitting the bullseye on the first stab is an occupational hazard of blogging. No hard feelings, I appreciate your work.
I hear ya.
I've seen some of Bruce's work where he uses a red pen on document's where he does show obvious sarcasm...so I was also taken aback by it.
Still giving him the benefit of the doubt.
"nay, duty bound by the protocols of my lofty station"
Love it ;-)
The downside of aggressive US rulemaking with respect to the non-US financial accounts of US Persons has made it difficult for US Persons to open such accounts. My own brokerage account at the UK's Charles Stanley & Co. was closed by them when they ejected the accounts of all US Persons. I was the last US Person accepted for an account at Brewin Dolphin. Recently, they have been making noises that they were going to also eject all such accounts US Persons.
We are now living in the land of the Used To Be Free. The income tax has justified the destruction of all financial privacy, that is except if you have a villa in the Dominican Republic and you sit on the House Ways and Means Committee.
Naturally, these restrictions don't apply to important people who are members of the Ruling Class, just as they don't have to submit to airport screening.
Very true. Relatives of the ruling party found "friends" at Citi more than happy to help them hide billions of dollars inside the U.S. I remember an incident where one of these boutique bankers got sloppy and was actually questioned about over $450M in funds she handled from a Mexican national, apparently in violation of numerous statutes. Her defense was to plead ignorance -- she thought the money was intended for real estate deals. Just the tip of the iceberg, and typical of the sleazy shit that runs through the gutters at the Big Banks.
any other shining US examples ?
This is a shining example of a Police State at work. The US is also the only country that taxes citizens who reside in other countries, the only major country that requires payment of a large "fee" to renounce your citizenship, the only country that believes it can apply its laws, especially antitrust laws, in foreign countries...etc. But of course, as your example shows, the US is totally hypocritical as well.