Switzerland's oldest bank is to close permanently after pleading guilty in a New
York court to helping Americans evade their taxes. Wegelin, which was
established in 1741, has also agreed to pay $57.8m (£36m; 44m euros) in fines to
US authorities. It said that once this was completed, it "will cease to operate
as a bank". The bank had admitted to allowing more than 100 American citizens to
hide $1.2bn from the Internal Revenue Service for almost 10 years. Wegelin,
based in the small Swiss town of St Gallen, started in business 35 years before
the US declaration of independence. It becomes the first foreign bank to plead
guilty to tax evasion charges in the US. Other Swiss banks have in recent years
moved to prevent US citizens from opening offshore accounts. US Attorney Preet
Bharara said: "The bank wilfully and aggressively jumped in to fill a void that
was left when other Swiss banks abandoned the practice due to pressure from US
law enforcement." The closure of Wegelin is a watershed moment that has huge
implications for the Swiss banking industry - and for Switzerland's famed
banking secrecy. Wegelin's guilty plea included the admission that it
intentionally opened accounts for US citizens to help them avoid tax. In court
Wegelin's managers said they knew it was wrong, but thought they would not be
prosecuted because it was legal in Switzerland, and common practice in Swiss
banking - words which are causing something close to panic among other Swiss
banks, including Credit Suisse, who are also being investigated by the US
authorities. Until now everyone expected Wegelin to fight the charges - instead
Switzerland's oldest bank will cease to exist. The message to the Swiss
financial sector is clear - the US will not give up this fight over tax. The
Swiss government has been trying for months to negotiate a deal with the US
which would protect Switzerland's banking secrecy. The Wegelin case makes that
look virtually impossible.
Access Investments-Building Awareness - European Union-ROMANIA
Friday, January 4, 2013
Switzerland's oldest bank is to close permanently after pleading guilty in a New
York court to helping Americans evade their taxes. Wegelin, which was
established in 1741, has also agreed to pay $57.8m (£36m; 44m euros) in fines to
US authorities. It said that once this was completed, it "will cease to operate
as a bank". The bank had admitted to allowing more than 100 American citizens to
hide $1.2bn from the Internal Revenue Service for almost 10 years. Wegelin,
based in the small Swiss town of St Gallen, started in business 35 years before
the US declaration of independence. It becomes the first foreign bank to plead
guilty to tax evasion charges in the US. Other Swiss banks have in recent years
moved to prevent US citizens from opening offshore accounts. US Attorney Preet
Bharara said: "The bank wilfully and aggressively jumped in to fill a void that
was left when other Swiss banks abandoned the practice due to pressure from US
law enforcement." The closure of Wegelin is a watershed moment that has huge
implications for the Swiss banking industry - and for Switzerland's famed
banking secrecy. Wegelin's guilty plea included the admission that it
intentionally opened accounts for US citizens to help them avoid tax. In court
Wegelin's managers said they knew it was wrong, but thought they would not be
prosecuted because it was legal in Switzerland, and common practice in Swiss
banking - words which are causing something close to panic among other Swiss
banks, including Credit Suisse, who are also being investigated by the US
authorities. Until now everyone expected Wegelin to fight the charges - instead
Switzerland's oldest bank will cease to exist. The message to the Swiss
financial sector is clear - the US will not give up this fight over tax. The
Swiss government has been trying for months to negotiate a deal with the US
which would protect Switzerland's banking secrecy. The Wegelin case makes that
look virtually impossible.
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Jeffrey Neiman, a former US federal prosecutor who was involved in a previous investigation into Swiss banks, said: "It is unclear whether the bank was required to turn over American client names who held secret Swiss bank accounts.
"What is clear is that the Justice Department is aggressively pursuing foreign banks who have helped Americans commit overseas tax evasion."
It remains to be seen whether US authorities will continue with, or drop, parallel charges against three Wegelin bankers, Michael Berlinka, Urs Frei and Roger Keller.
The Wegelin case comes four years after a far larger Swiss bank, UBS, agreed to pay a $780m fine to US authorities related to tax evasion charges. UBS also agreed to reveal the details of US account holders.
However, UBS neither pleaded nor was found guilty. Instead it and US prosecutors came to what is called a deferred prosecution agreement, with the fine being paid in exchange for the charges being dropped.
Peter Jay, who was Britain's envoy to Washington between 1977 and 1979, said that the definition - two consecutive quarters of negative growth - had no basis in economic theory and was created by the US Government in 1967 to aid the re-election prospects of President Lyndon Johnson. Mr Jay, who said he was "in the room" when the definition was established, said that Art Okun, the chairman of Johnson's economic council, acted upon "indications that there might be a recession that year", which he feared would dent the President's popularity. He said: "Art had the neat idea that if we had a definition of recession which meant that people could say we are not actually in a recession, not technically, that would get the president out of a difficulty. "So on the back of an envelope he invented the idea that in order to call it a recession you had to have had two consecutive quarters of negative growth." Mr Jay, who went on to become the BBC's economics editor, said: "This was completely arbitrary - there was absolutely nothing scientific or in the economic theory that requires that a recession be defined in that way. It was just a neat device by a clever economist trying to help his chief who was faced with a political challenge.
"It's entirely spin, entirely semantics. The whole argument about are we or are we not in recession in completely barmy. The rest of the world, in this as in so many things - often for good reasons - follows the United States.
"Because it is big and important and dominates English language economics, the world feels it has to follow."
http://www.telegraph.co.uk/fin...
TAXES are too high, both direct and stealth. Putting them up by so much when the country was in such a fragile state was cretinous and has put us into perma slump. I used to employ 16 people full time, I now employ 4 part time. Why? because the tax and red tape and general nightmare of doing business here now makes it just not worthwhile to really push anymore. Sad, but a fact.
More positive economic data from the US. The ISM non-manufacturing index - a snapshot of the US services sector - rose to 56.1 in December, the highest since February.
This is up from 54.7 in November and above expectations of a 54.2 reading. Here's some comments from respondents to the survey:
•"Business conditions are picking up despite the current economic state and the federal budget issues." (Professional, Scientific & Technical Services)
•"The holidays will slow construction some, but overall business remains about 25 percent ahead of last year. Weather has been favorable." (Wholesale Trade)
•"Consumer optimism increased; lower gasoline prices lead to higher retail sales." (Public Administration)
•"Business has picked up significantly during this last quarter of the year." (Transportation & Warehousing)
US jobs growth on target at 155,000
The US jobs market was steady in the run up to Christmas, with the number of non farming jobs up 155,000 in December.
The growth was in line with the 150,000 forecast by a Reuters poll of economists. November's figures were revised up from a growth of 146,000 to 161,000, suggesting the job market recovery may be slowing.
There were a total of 12.2m people out of work, according to the US Bureau of Labor Statistics, with the unemployment rate largely unchanged since September, still stubbornly above the 6.5% Federal Reserve target.
Last month, the central bank said it would keep interest rates near zero until its unemployment target is met, and as long as inflation does not rise above 2.5%.
Unemployment rates for women (7.3%) and blacks (14%) edged up in December, while rates for adult men (7.2%) teenagers (23.5%), whites (6.9%) and Hispanics (9.6%) showed little or no change.
The number of long term unemployed was essentially unchanged at 4.8m and accounted for 39.1% of those out of work.
Average hourly earnings for all non farm employees rose by 7 cents to $23.73, meaning over the year average hourly earnings rose by 2.1%.
The UK will lose its first class credit rating in 2013, economists at Citi bank have declared following Friday's downbeat economic indicators.
Citi has revised its growth forecast down to 0.4% from 0.8% for the year, well below the 1.1% consensus, and expects growth to stay weak in 2014, at only 0.5% to 1%. The bank's Michael Saunders predicted in a note:
Even if the economy does not suffer a treble dip recession, we expect that real GDP will not regain its prerecession peak until 2016, with real GDP per head not regaining its prerecession peak even by the end of this decade.
With the public debt/GDP ratio set to surge further in coming yeras, we think the uK will lose its AA rating in 2013.
Saunders forecasts that the government debt to GDP ration will balloon to 95% by the end of 2013, up from 44% at the end of 2007, with no prospect of cuts big enough to redress the balance before the next general election.
With the next election due no later than June 2015, and Labour ahead in the polls, there inevitably are doubts as to whether a new government would actually deliver post-2015 spending cuts unless constrained by market pressure. As a result, we have argued previously that the UK will probably lose its AAA rating in the next 12-18 months — indeed, with the weaker economic outlook, we now expect this downgrade will occur in 2013.
Citi pushed back its forecast for the first UK interest rate hike from 2016 to mid-2017, a full 8 yeras after rates fell to half a percentage point in early 2009.
Earlier Friday, Reuters reported that the UK's borrowing costs briefly overtook those of France, raising questions about how long the nation can retain its AAA credit rating.
Borrowing costs for 10 year UK Gilts rose above France's in early morning trading, hitting an 8 month high of 2.132 at 8:39. The UK retains its first class credit score, but France was stripped of its AAA last year.
Card transactions have been suspended within the Vatican City because of concerns about compliance with international banking regulations, including those concerning money laundering, the Guardian's Lizzy Davies reports from Rome. She writes:
If there's one thing more annoying than queueing for hours for the Sistine Chapel, it's queueing for hours only to be told that the marvels of Michelangelo's ceiling are off limits unless you have cash in your wallet.
Tourists and pilgrims flocking to the Vatican City since New Year's Day found that they had to pay for all purchases by cash or cheque after electronic transactions were suspended following concerns over the city state's compliance with international banking regulations, including those concerning money laundering.
The move – which left the Holy See embarrassed and scrambling for a solution – affected customers at the Vatican's well-stocked pharmacy, as well as at its several shops and post office, and, most significantly, its museums – home to the Sistine Chapel and other masterpieces. A notice on the museums' website apologised for any inconvenience caused by the problem, which it blamed on "reasons beyond [its] control".
European inflation flat
Inflation in the Euro area is expected to be registered at 2.2% in December, marking no change on the month before, according to a flash estimate from the European Union.
Energy inflation is forecast to have fallen to 5.2% compared with 5.7% in November, while at the other end of the scale services is running at 1.8%, up from 1.6% the month before, according to Eurostat, the EU's statistics office.
Gizem Kara, European economist at BNP Paribas, comments:
As the impact of indirect tax hikes and administered price rises falls out of the year-on-year comparison, we expect inflation to fall below 2% as early as end Q1. With labour-market conditions remaining weak and in turn weighing on household incomes, disinflationary, rather than inflationary, factors will dominate the inflation outlook in 2013.
Howard Archer at IHS Global Insight says:
There is nothing really alarming in the December eurozone inflation data and underlying inflationary pressures seemingly remain muted amid extended weakened economic activity and high and rising unemployment. Consequently, it still seems likely that eurozone consumer price inflation will move below 2.0% over the coming months. This will help consumers’ purchasing power and facilitate further stimulative action by the ECB [European Central Bank].
It seems more likely than not that the ECB will hold off from trimming interest rates at its 10 January meeting, although we would not rule out a move. And we do expect the ECB to take interest rates down from 0.75% to 0.50% sometime during the first quarter.
Interestng read: In a new paper published Thursday, IMF Economic Counsellor Olivier Blanchard and research-department economist Daniel Leigh show the IMF recommended slashing budgets too fast early in the euro crisis, starving many economies of much-needed growth.
In “Growth Forecast Errors and Fiscal Multipliers,” Messrs. Blanchard and Leigh calculate IMF and European economists underestimated the euro-for-euro effect of cutting government budgets. While economists expected that cutting a euro from the budget would cost around 50 cents in lost growth, the actual impact was more like 1.50 per Euro.
http://blogs.wsj.com/economics/2013/01/03/imf-details-errors-in-calling-for-austerity/
I wonder if any of the serious people are taking notice of this?
The root of today's problem is that central banks set interest rates too low for too long, it has nothing to do with the morality of us the people, because we just started to live beyond our means.
QE, low interest rates,. everything set up with the "best intentions" to help the economy jump start. When we think the economy has improved, then we remove the stimulus and then,... only to find out that suddenly the mess is back.
The solution? Carry on with the "temporary measures".
Are we doomed in the West??
It seems obvious to me that we need a great genius, a sort of Alfred Einstein of Economics of the XXI century, to save our civilisation. To be able to put on tracks the economy, and I mean not the real economy,... but, first of all, the Science of Economics.
The problem is located in our Knowledge, the real economy are facts, facts are always right, we have to learn how to treat this mysterious and enigmatic lady called "economy".
With Spanish 10Y yields hovering at a 'relatively' healthy 5%, having been driven inexorably lower on the promise of ECB assistance at some time in the future, the market has become increasingly unsure of just who it is that keeps bidding for this stuff. Well, wonder no longer. As the WSJ notes, Spain has been quietly tapping the country's richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds - with at least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt
r the state will print the cash for pensions either directly or through printing the interest on government debt and it will remove some cash from the economy from time to time to guarantee a demand for sterling and counter inflationary tendencies, as our MMT colleagues and their fellow travellers would have it.
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ambrosia2
04 January 2013 11:28 AMLink to this comment
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Spain has been quietly tapping the country's richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds - with at least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt
Not the only case. 40% of the Portuguese social security fund is in national debt. A lot of the rest is in other countries' debt.
So any haircut or default or delaying payments on national debt will hurt state pensions.
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zippyp
04 January 2013 9:34 AMLink to this comment
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strikes me as odd that people who oppose EU nanny type regulations use Norway as an example. There is hardly a country where the state intervenes more in peoples' lives than Norway.
No off-licences exist in Norway. Selling spirits is a monopoly of the Norwegian Crown. Prices are set to dissuade people from buying hard alcohol. Buying a bottle of Beefeaters' at the state monopoly will set you back £38.
Will people who wish to withdraw from the EU "nanny state" please choose another role model? Thank you.
debts are manageable with a growing economy. As the economy grows, the deficit as a proportion reduces. This is the equivalent of a household whose income grows at a faster rate than their expenses. They may still have debts, but as long as they keep working and earning more, the debt is perfectly manageable. Add to that, the ability to print their own currency and the ability to restore the billions lost in tax evasion and avoidance, you would think that a sensible government would have all the tools at its disposal to have a thriving, modern economy. But no, this lot are most concerned.. not with the deficit..(that is increasing)...or clamping down on tax thieves.... but with people who are already disadvantaged through unemployment, poverty or disability... and I don't mean concerned as you or I would be.. I mean concerned as in terms of how much more money they can deprive them of in order to avoid tackling their rich, thieving friends. No one with any morals would defend this bunch of gangsters.
this seems to me a bit like economists suddenly realising that the "little people" are actually more important to the healthy functioning of an economy than any of them had ever realised.
to be kind it could be because including human activity in economic models makes them harder and more complex to work.
the less kind interpretation is that they were concentrating so much on the financial sector, money supply, econometrics and money in general, that they just forgot there were real people out there.
Well something is wrong.
You can't have a booming stock market and predictions that the defying gravity stable housing market is also going to enter a boom within 3 months and then go around saying that almost two thirds of the population are struggling to pay their rent or mortgage, the service and construction sectors indicate we are back in recession and if it wasn't for food banks we would have deaths from starvation.
There is either money or there isn't.
Or from what I can tell of the cadaver that is our economy - the money is pooling in certain parts of the corpse as with rigor mortis and nobody else is getting anything other than it sucked out of them.
Well done Ruling Elite, reward yourself with some more of the tax payer's money and let your mates have some while you are at it although we haven't had to prompt you to do that in the past.
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