The Strange Tale of Swiss Banking – And What It Means for You
By Staff News & Analysis - May 30, 2014

Secrecy's out, so here's what Swiss banks can still offer … If Swiss banks were to cast off their usual discretion and make a marketing pitch these days, it might start off something like this: Dear Potential Client, While we would be delighted to open an account and manage your money for you, once you've complied with our anti-money laundering provisions, please be advised that we will no longer be able to help you avoid taxes back home, and in fact may soon start providing account details to your national tax authorities. Moreover, if you are American, please stay away. We've been so beaten up by the Justice Department that we'd rather not take your money at all. – Reuters Opinion

Dominant Social Theme: The Swiss will survive by offering innovative products and services not available elsewhere.

Free-Market Analysis: What, really, do the Swiss have to offer now? Is it possible that the UBS scandal was in some sense planned to bring down the system.

The damage is certainly clear; the Swiss government and banking community sacrificed centuries of banking history and culture to ensure the continued vitality of several Western-style banking conglomerates.

UBS and Credit Suisse were US-oriented firms and the worst, presumably, that the US could do to them was to bar them from US soil and citizenry. But apparently being shut out of the US so panicked the Swiss elite that they have now sacrificed their entire private banking industry and a millennium of tradition.

Here's more from the article:

Switzerland is bowing to massive international pressure — regulatory, judicial and political — to clean up its banking system, and the big question is how it can remain competitive as a financial center once it has done so. The fabled secrecy that Swiss banks used to provide — and which was a key to its attractiveness as a financial center — has been cracked open and replaced by a more nebulous form of confidentiality and privacy, the full details of which still need to be hammered out in international agreements.

The U.S. is leading the attack. After months of sparring with the U.S. Justice Department, Credit Suisse, one of the two big Swiss banks, this week pled guilty to conspiring to aid tax evasion and agreed to pay a $2.6 billion fine. The bank was just the latest such case; in 2009 its cross-town rival UBS settled with the U.S. government over similar accusations.

… These measures are part of a worldwide crackdown on offshore finance and tax evasion, and Switzerland has little option but to comply if it wants to maintain its place in a globalized industry. "It's a huge shift in culture for Swiss banking," says Stéphane Garelli, a professor at IMD business school in Lausanne. "Everyone is fed up and wants to turn the page."

But without secrecy as a competitive advantage, what is the future of Swiss banking? Switzerland has some undeniable strengths, including a long tradition of wealth management, political stability, an independent currency and what Garelli describes as an extensive "ecosystem" of lawyers, fiduciaries, accountants and other experts alongside the bankers.

… Experts say the big banks, including Credit Suisse, began adjusting to the new realities years ago. But some of the smaller private banks have been in denial until recently. One sign of a shift is that they are increasingly changing their governance structures, abandoning the age-old practice of being unlimited liability partnerships.

The change protects them personally, especially against legal action, but it also alters the trust-based relationship at the core of these private banks' business models. When you knew that the banker sitting on the other side of the table was personally on the hook if there were problems, you may have been more willing to trust her with your money.

Today Swiss banks of all sizes are trying to determine what they can offer clients to make up for the erosion of secrecy. The National Bank's Jordan provided some answers in his speech, saying banks need to ensure they can provide "considerably above average" value added for their customers, as well as stability during crises and "business conduct and reputations far beyond reproach."

If you read this last paragraph, you will see clearly the problems that the Swiss banking industry faces. Once, one could define exactly what Swiss banks did. They were private entities that provided their clients with numbered accounts and anonymity. The anonymity was part of an ancient tradition. But try to define what the Swiss system is today. Hard to do.

We remain surprised that an industry of such power and probity should allow its representative government to reduce it to a shambles inside of a few years' time. From our perspective, there was a lot more going on there than just a US attack on Swiss banking. In fact, it is well known that the banking industry in Switzerland is owned in part by the same Western powers that were behind the Justice Department's targeting of Swiss banking.

Thus, the same groups that managed the judicial attack from US soil acquiesced to it by signaling that their Swiss-controlled banks would abide by suggested settlements. Both the attackers and the accused were controlled by the same forces.

Not entirely, of course. But enough so that we can suggest with some surety that the Swiss affair was yet another episode of directed history. Western powers had decided that Swiss bank neutrality had to go, for one reason or another, and seemingly created the requisite scenario.

We are also aware that the most powerful banking families will likely continue to use Switzerland and will receive anonymity not afforded to others.

Finally, it is interesting that remaining private banks are switching from partnerships to corporations. This tends to confirm points made previously in these pages regarding how judicially enforced corporate personhood distorts markets and enables market behavior that would not otherwise be feasible or tolerated.

The article itself has a kind of chirpy tone, accepting as reality that governments, specifically the US government, has the right and obligation – on behalf of citizens – to eviscerate an industry in another country that provides substantial goods and services around the world.

Now, it may be that this industry enabled "tax evasion," at least in some cases, but that is something that states have traditionally dealt with using their own resources and usually applying them within their own borders. In many ways, it is an extremely slippery slope to insist that other countries cooperate with one's own bureaucratic priorities and national security concerns.

Eventually, perhaps, the US will face attacks from abroad over its behaviors. More than that, the precedent is a bullying one that seems to enshrine military and judicial force as the lodestars of international influence.

What remains most puzzling is that this most powerful industry composed primarily of private Swiss banks allowed itself to be virtually ruined in a few years' time. This alone shows us that there are very deep waters swirling around this debacle and that much of the story – most of it – has not yet been told, and may never be.

The precedent has been set, however. One nation may indeed interfere judicially in the affairs of another and force compliance.

The precedent is part of a wider assertion of privilege by a US government that is attempting to turn banking systems around the world into part of the US tax collection effort. FATCA and other regulatory environments are being imposed globally in an attempt to ensure that the financial affairs of US citizens are entirely transparent to the government.

No nation has ever asserted or tried to enforce such global authority.

Other articles and editorials in these pages have suggested that US citizens protect themselves from their government's overreach as best they can with second passports, second residences and various assets that can exist privately beyond government scrutiny and potential confiscation.

After Thoughts

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  • Danny B

    Good article. It is interesting to note that Switzerland is THE intermediate destination for all the gold going East. China knows that they will be stuck with any tungsten bars that they import. Everything gets remelted in Switzerland. Presumably, the tungsten gets sent back to London. Evidently, everybody trusts Switzerland to be accurate and honest with gold.

  • LaPauta

    “Not entirely, of course. But enough so that we can suggest with some surety that the Swiss affair was yet another episode of directed history. Western powers had decided that Swiss bank neutrality had to go, for one reason or another, and seemingly created the requisite scena.”

    Can you explain me please where your “surety” comes from? I mean “one reason or another” seems for me not to be a quiet good explanation for why the “western powers” had to eliminate the Swiss bank neutrality…

  • Fabian

    A small technical explanation. The problem faced by pure private bankers (partnership) is correspondent banking. As a bank you need to open relations with other banks to conduct business in different countries. These relations are opened based on credit lines. In order to get a credit line you need to show your books. If you’re a partnership, your books mean your whole personal finances. Private bankers could go around this thanks to their reputation but compliance is getting more strict and getting exceptions from correspondent banks more difficult. Furthermore, for the big ones, who get more and more of their business from the institutional side, it is not possible to work on this trust system. As to the banking industry giving up to the bullying of the US, there was no way around it. Even if banks would have cut all relations with the US, no dollars, no US securities, this would have not been the end of it. The US could have simply ordered other banks to cut relations with Swiss banks. You can be sure that UK banks would have complied. Then what? You can’t deal in the US, you can’t deal in the UK, who’s next? Now why did they go after the system (because they go after the system not only after the Swiss), I don’t know. What I know, is that, if you look at the Congress’ public bashing of CS, the average account value at stake is $ 500,000! That’s it. They go after people who on average have barely enough money to buy a 3+2 house in Los Angeles. The Romneys and Buffets of this world are still safe paying an average 17% in taxes and will keep their Swiss bank accounts, legally. It’s getting more and more difficult for the average Joe to reach escape velocity.

  • Why Are Food Prices so High? Because We’re Eating May 28, 2014

    Anyone who buys their own groceries (as opposed to having a full-time cook handle such mundane chores) knows that the cost of basic foods keeps rising, despite the official claims that inflation is essentially near-zero. Regardless of what we eat, we’re actually eating oil. Common-sense causes include severe weather and droughts than reduce crop yields, rising demand from the increasingly wealthy global middle class and money printing, which devalues the purchasing power of income.

  • Webforager

    According to, the U.S. Treasury dept. created “Intergovernmental Agreements” providing U.S. reciprocity for those foreign governments which sign on to the deal:

    “With the IGA currently being signed by foreign governments, the U.S.
    Treasury is promising reciprocity on information on foreigners holding
    financial assets in the United States. This is something the Treasury
    cannot and should not be promising. Already banks in Texas and Florida
    have protested that broad-based reciprocity will destroy their banking
    markets; many foreigners residing in Latin America have chosen banking
    in these states not to evade foreign taxes but for the anonymity and
    security provided, due to unstable governments in the countries where
    they reside.”

  • Joelg

    Nice article, DB. And interesting GATCA story link. USA.GOV Masters seem to have figured that they might as well go whole hog and Colonize the Whole World, not even leave a tiny corner like St. Kitts or Switzerland alone. It’s an eradication mentality. Eradicate freedom, like a weed, wherever and whenever it might sprout and prevent its spread. Equality of a sorts for the human cattle under the New Feudalism, with everyone equal ala George Orwell’s Animal Farm.

    GATCA or GOTCHA to de-lice and fleece us to pay our Dear Glorious Leaders lifetime tribute or pensions for Abomination-Care.. Powers that be seem to prefer a return to the Stone Age (e.g. for Libya, Iraq, Afghanistan, Pakistan etc.) and Dark Ages (for the rest) with the medieval nostrums of religion, prayer and spirituality replaced by modern amorality and nonstop info-tainment and entertainment under USA hegemony.

    Will be interesting to see how it plays out. Will a Queen Hilary I or a King Bush III insist on leveling Mecca and unveiling women and installing a lesbian or gay sheik to rule Saudi Arabia as part of the shift, with the old leaders getting the Mubarak treatment. Equality enforced by USA would seem to lead in that direction. Would be interesting to know how Middle Eastern money and banking fits into the picture. Can’t see anybody escaping easily, and I would presume that FATCA to GATCA will expand its reach from controlling money and bodies to every orifice and belief. Jefferson and the Founding Fathers clearly got something wrong in their USA experiment, as they clearly were not formulating plans for birthing an International Terror State bent on enslaving its people and colonizing the world.

    • Danny B
      • Joelg

        A very interesting link, and an eloquent and persuasive groundwork for a Totalitarian regulation of human activity or at the very least the dividing up of the limited pie for some derivative trading ala George Soros; stuff like cap-and-trade for CO2, SO2 and whatever else these guys dream up under the Environmentalism Banner. When I was studying ecology at UC Berkeley and taking UC’s econ classes (Samuelson & Milton Friedman) some fleeting decades ago, this was exactly the nostrum being peddled as “Environmental Economics.”

        It is missing: 1) Feedback cycles (negative and positive) which will limit the extent of the worst case outcome. I suggest a basic ecology text from a used bookstore. Highly simplified as population biology: Put a house fly or flour beetle in a jar with unlimited resources, and before the year is out every inch of the Earth will be covered with the insect or a chain of the insects will stretch beyond the moon in the solar system. A biologist calculated all this stuff back in the 1600s, measuring fly breeding. Simply put, does not happen (the worst case ecological scenario) because of the feedback loops triggered along the way. A concept perhaps more familiar to engineers than to economists.

        2) Deforestation, as Anthony Wile pointed out in his hemp article a week or two ago, is a self-inflicted wound from banning hemp and instead using trees for fiber and paper production. With the slowing global economy and substitutes for tree products, the negative feedback loop on tree cutting is happening. Even rainforest cutting will soon diminish without any additional help from George Soros or carbon trading.

        3) “Climate Change” is a brilliant Orwellian term. Climate Change is a slogan, a political rallying cry like 54-40 or Fight or Remember the Maine (Spanish-American War). Climate Change is a phrase “wide enough to encompass warming up, cooling down, and even staying the same temperature while the numbers fluctuate around the mean or average.” In other words, a term of nebulous meaning that manages to encompass everything and nothing at the same time. Truly brilliant.

        4) Precautionary Principle – not a bad concept, except when aimed at the wrong target. In this case the Climate Change rallying cry for war of a sorts against Carbon or Carbon Dioxide. Odd for carbon-based organisms to be proposing.

        5) A quote from the Italian chemist Primo Levi, a concentration camp survivor (later suicide) not afraid to challenge mainstream thinking: “Carbon dioxide, that is, the aerial form of carbon…this gas which constitutes the raw material of life, the permanent store upon which all that grows draws, and the ultimate destiny of all flesh, is not one of the principal components of air but rather a ridiculous remnant, an ‘impurity,’ thirty times less abundant than argon, which nobody even notices. The air contains 0.03 percent; if Italy was air, the only Italians fit to build life would be, for example, the 15,000 inhabitants of Milazzo in the province of Messina. This, on the human scale, is ironic acrobatics, a juggler’s trick, an incomprehensible display of omnipotence-arrogance, since from this ever renewed impurity of the air we come, we animals and we plants, and we the human species, with our four billion discordant opinions, our millenniums of history…”

        Link []

        6) “Carbon is probably the most important element from an environmental point of view,” writes University of Cambridge chemist John Emsley in Nature’s Building Blocks. “The Earth’s early atmosphere may have contained a lot of carbon dioxide and methane, but once life evolved that began to change. Today, there is very little of these gases and a lot of oxygen instead, thanks chiefly to the action of plants which convert carbon dioxide and water into carbohydrate and oxygen by photosynthesis. The Earth’s atmosphere contains an ever-increasing concentration of carbon dioxide and carbon monoxide, from fossil fuel burning, and of methane, from paddy fields and cows. HUMAN CONTRIBUTIONS TO THESE SOURCES ARE STILL MINOR COMPARED WITH NATURAL SOURCES: MOST CARBON DIOXIDE COMES FROM PLANTS, MICROBES AND ANIMALS, WHILE METHANE IS GIVEN OFF BY SWAMPS, MARSHES AND TERMITE MOUNDS.”

        More Emsley: “Most of what we eat –carbohydrates, fats, proteins and fibre – is made up of compounds of carbon…most ingested carbon compounds are oxidized to release the energy they contain, and then we breathe out the carbon as carbon dioxide. This joins the other carbon dioxide in the atmosphere, from where it will again be extracted by plants and become part of the carbon cycle of nature…The cycle rules the tempo of life on Earth and turns over 200 billion tonnes of carbon each year…In this way carbon is passed up the various food chains, with each recipient releasing some as carbon dioxide, until most carbon is back where it started.”

        Logically and scientifically, CO2 emissions are a good proxy for carbon trading derivative schemes, but since CO2 levels in the atmosphere are insignificant and mostly from natural sources, they really do not live up to the advertising/propaganda claims. Furthermore, no one really understands how the 200 atmospheric gases, cloud cover, the Earth’s tilt, etc. all interact to produce climate change. In short, CO2 cap-and-trade et al. will be good for the financial industry and the political and other elites wishing Total Control. It’s a great advancement on John Law’s Mississippi Company and other similar scams, as those running the scam can claim that the results are still centuries in the future; you just have to believe, have faith, that they are right. Bull Shit Environmentalism, but extremely well-marketed. A case study in Brilliant Propaganda and mis-application of the Precautionary Principle.

        • Danny B

          Joelg, so you went to Berzerkly 🙂 That school certainly runs the gamut as far as results. I agree, of course, on the carbon issue. I also agree on feedback cycles. Given all the variables and external energy inputs, it is amazing that there is mufti-cellular life on this rock. BTW, my brother wrote a book on the need for a new “ecology” for mankind. You might find it interesting.

    • MysterySolved

      You left out the TransGender promotion now to the fore, as yet another preplanned attack on traditional white males and the traditional family, Tavistock Institute-style (brainwashing lie factory of the world). Traditional white male ‘protector and head of the family’ get your testosterone back. Resist the ‘sissification’ of the western white male.

  • How Inflation Helps Keep the Rich Up and the Poor Down Mises Daily: May 31, 2014 by Jörg Guido Hülsmann

  • MysterySolved

    No depositors’ secrecy permitted any long (except the money powers). First FATCA, then GATCA (global reach into our banking info), and then Global Taxation on every human being (except these money powers). They need to remove the privacy hook in order to introduce the Global Tax Hook. We, the world’s people, are to financially support the On World Global Government thus supporting our own servitude to a bunch of psychopaths. Read a unique book, a scientific study of political psycopathy, its roots and causes (genetic or through brain damage via disease etc), which was prevented from being published for 20 plus years by Zigniew Brzezinski (now why would he be against this unique study exposing that 4 – 6% of each nation’s population are wired differently to the rest of us at the subconscious instinctive level ie no conscience, lacking in empathy etc?):

    “POLITICAL PONEROLOGY, A Science on the Nature of Evil Adjusted for Political Purposes” by Andrew M Lobaczewski”

    and ‘strongly’ recommended by the likes of Catherine Austin Fitts, Philip Zimbardo – Professor Emeritus of Psychology at Standford University.

  • LULU

    Many PSYCHOPATHS ….Pakistan…India..and the Muslim world…still in the stone age …same goes for the male human animal..

  • LULU

    1291….Pharaonic blood line create Swissland..along with the.. HOLY ROMAN EMPIRE… shafting every one from birth

  • Pilgrim

    Marxism is a political ideology with global-domination ambitions. Islam is a religious ideology with global-domination ambitions.

    It seems the US Treasury in concert with the FRB and US justice department is attempting to leverage a financial global-domination ideology.

    What ever happened to national sovereignty? Or is this now a passe notion since Hitler abused the concept.

    Can the internet coalesce enough resistance to thwart the elites in their juggernaut?