swiss bank account 88.
(photo credit: )
On Wednesday night, Switzerland became toast. Not in the physical sense, of course. The glaciers, snow-capped mountains and ski slopes are still there, the dairy sector is still making chocolate, while the giant factories along the Rhine churn out chemicals and pharmaceuticals. But the banking industry, the heart of the country's economy, has just been neutered. Switzerland, as an "offshore" financial center going back over 200 years, is no more.
The end of "Switzerland as we know it" came when the Swiss government, in an emergency meeting, authorized UBS - the larger and weaker of the two giant Swiss banking groups - to sign a settlement that it had hammered out with the US Treasury. Under the settlement, said the US Justice Department, UBS will "immediately provide the US government with the identities of, and account information for, certain US customers of UBS's cross-border business."
This, said Justice, was "unprecedented" - perhaps the understatement of the century to date. For a Swiss bank to provide data on its clients to a foreign government is - in a country where there is but one mammon and UBS and Credit Suisse are its "profits" - sacrilegious. Once that's gone, all the rest crumbles.
But UBS and the Swiss government - two sides of the same coin, so to speak - knuckled under, because the alternative was that the Americans would have destroyed the bank. This would have bankrupted the Swiss government and effectively collapsed the entire economy. The choice to give up the entire structure of banking secrecy and try to figure out a new national business model is preferable, because it leaves the rest of the economy - the chocolate and chemicals - still functioning.
The UBS case, which has been underway for some time - in, of all the unlikely places, Fort Lauderdale, Florida - has holed the once-majestic but now battered fleet of Swiss banks beneath the waterline. Hardly surprising, then, that the settlement was seen as a "capitulation" by the newspaper Neue Zurcher Zeitung and termed "a true catastrophe" by a lawyer from Geneva, where refugees from the French Revolution founded private banks in the closing years of the 18th century.
Since then, Switzerland has become the preferred haven for flight money of all sorts, whether tyrants and tin-pot dictators of third-world countries, drug barons and other mega-criminals, or just run-of-the-mill tax evaders from Milan to Sao Paolo. The tyrants and drug barons were the cause of the first breach in the wall of banking secrecy when, after the collapse of the Communist bloc ended Switzerland's role as a neutral and amoral space in an ideologically polarized world, American pressure forced the Swiss to spew out the ill-gotten gains of major-league bad guys. But the system continued to provide secrecy for mere tax evaders, who were the banks' bread-and-butter - until a few years ago. Now the wall has been smashed and everyone exposed.
And not just in Switzerland. The initial breach of banking secrecy in the 1990s, together with the rising tide of new wealth around the world, spurred the creation and/or growth of many neo-Switzerlands - in Europe, the Caribbean and elsewhere. Although lost tax revenues mounted dramatically, in the era of prosperity these were not critical; indeed, in many countries - including Israel - the predominant view was that if governments created an environment hostile to the rich, such as by trying to tax them properly, these self-proclaimed creators of wealth, and hence benefactors of the greater good, would leave entirely. With tax revenues soaring as the good times rolled, governments were loath to undertake a crusade against so powerful a constituency.
Nevertheless, the two main economic powers - the US and the EU - pushed steadily ahead in their efforts to undermine the secrecy laws. The Germans have been focusing on Liechtenstein, another important European "offshore" financial center (like Switzerland, quite landlocked). But the key battle has been the US versus Switzerland, with the Germans and French cheering the Americans on from the sidelines. Now that it's ended in a Swiss surrender, and as government tax revenues collapse all over the world - and with attitudes to rich people having swung from jealous respect to angry contempt - the heat will really be turned on. The entire "offshore" financial sector, already reeling as hedge funds and other "vehicles" blow up en masse, is facing the destruction of its legal underpinnings, which will drive it underground, instead of offshore.
The Swiss people have a well-deserved reputation for resourcefulness, so expect them to pull through. Their clients, however, had better watch out for themselves, because the illusion that their solid and reliable Swiss banker will be there for them has just gone poof.