An interesting article appeared in the New York Times this weekend. It concerned the fabled Swiss banking secrecy. In part:
March 29, 2008Later in the article, it was observed:
Trying to Get the Swiss to Talk
By CARTER DOUGHERTY
GENEVA — Like Paul Revere, Konrad Hummler sounded the alarm last week as he made his way by train and by plane to his bank’s branches across Switzerland. This country’s storied role as secret banker to the world’s wealthy is under threat like never before, Mr. Hummler warned.
The concept of bank secrecy is deeply rooted in Switzerland, akin to the confidentiality rules governing doctors and lawyers in other countries, and a 1934 law makes it a crime for bankers to disclose client information. For foreigners, this combination is an effective shield against authorities at home.It is going to be interesting to see how this plays out.
The idea that Switzerland was home to many of the UN institutions when it was not a member of the UN always seemed in appropriate.
Now Switzerland, physically located in the middle of Europe is not part of the European Union (EU) seems equally bizarre.
When weird things seem to be happening I am always intrigued by the economic issues that are behind the first impressions. In the case of Switzerland ... it is banking.
When I was a student ... about 50 years ago ... there was a lot of talk in the UK about the "Gnomes of Zurich", the Swiss bankers who had power over currencies and were of great concern to British economists worrying about the role of Sterling as a stable world currency. I travelled to Switzerland during one of my college breaks and met with some of the banks in Zurich ... probably at a very, very junior level, but how was I to know?
But years later I learned more about Swiss banking and the role that secrecy played in attracting money from around the world for safe keeping.
My first impulse is to be against the secrecy of Swiss banks because they make it possible for crooks, especially crooks who have official capacities in governments, to hide the wealth that they have acquired ... often by very dubious means ... and to keep it protected for themselves (if they live long enough) and their families to enjoy.
But there is another side to this as well. Governments throughout the world have, at one time or another, passed laws to take away the wealth of people who, arguably, have a legitimate right to the wealth. In recent times, the "State" has sometimes made itself an almost God-like institution and there is a legitimate need for people to be able to hide wealth somewhere to protect it from this sort of predatory behavior.
The scandalous behavior of wealthy people in avoiding reasonable tax liabilities should end ... clearly there is a need for taxation, and everyone should be paying. But is getting this information from a bank in Switzerland ... or Liechtenstein ... the answer. Rather, I would argue, a system of understanding wealth creation should be in place so that the tax authorities are much better able to do audit and investigation without requiring the Swiss to do their work for them.
I hate corruption ... but it would be better to stop corruption at source, rather than ex-post facto when the damage is long done and now all that remains is the loot in a Swiss Bank.
Of course, from a New York perspective, it is good to have an article that points to the banking sector in another country ... the banking sector in the United States and New York is in a shambles.