Raising the stakes in a showdown over Swiss banking secrecy, U.S. prosecutors have given UBS "several weeks" to hand over scores of American client names or ultimately face potential indictment over its offshore banking services, a person briefed on the matter said Monday. While no indictment is imminent, this person said, any refusal to turn over the names would lead prosecutors to ask a U.S. judge to order UBS, the world's largest private bank, to comply with a prior summons demanding the names of American clients using hidden offshore accounts. That in turn, if UBS refuses, would very likely lead to an indictment, perhaps within months, this person said. Even if UBS ultimately turns over the names and averts indictment, it is almost certain to be forced into a deferred-prosecution agreement with a heavy fine, this person said, adding that "it can't get better than a D.P." The bank could also face possible sanctions, from the U.S. Securities and Exchange Commission and banking regulators, that could limit its overall ability to conduct business in the United States, the person said. -International Herald Tribune
Dominant Social Theme: Globalism will have its day.
Free-Market Analysis: We can't shake the feeling that there is more at work here than irritation with the Swiss – or a need for additional US taxpayer funds, or even a determination to punish miscreants. We can't prove it, but it strikes us that the financial crisis is being used to advance a variety of political and regulatory agendas.
For instance, when one looks at the spending in the United States for the US$800 billion that the Obama administration is trying to leverage right now, one is struck by the amount of trimming on the tree. There are all sorts of funding requests that one would be hard-pressed to justify as contributing to America's economic recovery – even for those who believe in such things. (It seems as if some are taking advantage.)
The determination with which US regulators are going after the Swiss may also have ulterior motives. We think in fact it could be motivated by an intention to impose Western style financial regulation around the globe. Where do the Swiss fit in? Well, you can't have a seamless regulatory system if you have popular tax havens. It doesn't work. So maybe that is one reason the Swiss are being challenged so relentlessly.
Of course we are not suggesting that one take illegal advantage of tax havens, only that the rationale for US prosecution of the Swiss on this matter is at least somewhat unbelievable. It's been going on for centuries after all. So why now? Does it have to do with what seems to be an urge to further regulate every financial endeavor, both in America and the EU? If so, China will be asked to play along and the Swiss will be told they must get along with other tax havens. This seems to be happening.
But we are not sure all this strong-arming is going to do the trick, not really. The Anglo-Saxon monetary elite is not exactly on a roll. It seems to have misjudged the severity of the recession and even the depth of resentment on the Internet. Thus, for instance, the Chinese may well go their own way, along with Russia. And the Swiss are a hard case, anyhow. There are about six million of them and mostly they are an exasperating and spirited lot of German-Swiss. This group has a millennial memory of European politics – far more brutal than anything the Anglo Saxons can probably launch currently – and their livelihood is tied up in financial services.
Prediction: UBS may or may not fold, but absent an invasion (Oh, those Alps!) the Swiss are likely to cling stubbornly to their precious banking paradigm – including tax-advantaged strategies and an emphasis on the value and practicality of gold bullion. Yes, there may be tactical retreats but in the medium-to-long-term, the situation may not change as much as Western regulators currently hope.