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FTR#1300 The Collapse of Credit Suisse and the Shadows of Safehaven

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— George Orwell, 1946

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FTR#1300 This pro­gram was record­ed in one, 60-minute seg­ment.

Intro­duc­tion: Inter­na­tion­al finan­cial tur­moil sur­round­ing the col­lapse of sev­er­al major Amer­i­can banks and the absorp­tion of Cred­it Suisse by UBS has eclipsed a very impor­tant sto­ry about Cred­it Suis­se’s role in han­dling monies used by the post-World War II Nazi dias­po­ra.

After high­light­ing some of the Nazi accounts used at Cred­it Suisse and the fir­ing of U.S. inves­ti­ga­tor Neil Barof­sky by the bank, we dis­cuss Cred­it Suis­se’s role in the flight cap­i­tal pro­gram of the Third Reich and the unsuc­cess­ful attempts by U.S. offi­cials involved with Oper­a­tion Safe­haven to inter­dict the flight cap­i­tal.

Cred­it Suisse fig­ures promi­nent­ly in this account.

The pro­gram con­cludes with dis­cus­sion of the inter­dic­tion of Oper­a­tion Safe­haven, in part because of the indis­cre­tion of U.S. Vice Pres­i­dent Hen­ry Wal­lace.

Note that, had Safe­haven been suc­cess­ful, Ger­man indus­tri­al­ists and financiers in the defen­dants’ dock at Nurem­berg would have been asked to name their Amer­i­can co-con­spir­a­tors.

This would have placed some of the most promi­nent names in Amer­i­can indus­try and finance in the defen­dants’ dock, along with their Ger­man asso­ciates.

1. “Reports Accuse Cred­it Suisse of Imped­ing Hunt for Accounts Linked to Nazis” by Char­lie Sav­age; The New York Times; 4/19/2023; p. A8.

“A report by Neil Barof­sky main­tained that Cred­it Suisse had held accounts used for the Nazi Dias­po­ra to—among oth­er places—Argentina in the wake of World War II. Barof­sky was dis­missed as an inves­ti­ga­tor into Cred­it Suisse’s dirty laun­dry.

Inter­est­ing­ly, when describ­ing some of the Third Reich vet­er­ans whose mon­ey was held in Cred­it Suisse accounts, none of the per­sons were iden­ti­fied by name: “Infor­ma­tion about an account con­trolled by a Nazi SS offi­cer who was the rep­re­sen­ta­tive of a hold­ing com­pa­ny that held mon­ey con­fis­cat­ed from Jews . . . . the bank helped a Nazi-linked busi­ness­man . . . . who even­tu­al­ly broke with the Nazis [Fritz Thyssen?] . . . . The inves­ti­ga­tion also start­ed to scru­ti­nize accounts opened from 1952 to 1990 by a Nazi sci­en­tist who had been impris­oned dur­ing the Nurem­berg tri­als . . . .”

Why weren’t the indi­vid­u­als named? World War II end­ed in 1945. If any of the indi­vid­u­als were still alive, they would be very old. Was the rea­son for the secre­cy to pro­tect the ele­ments who prof­it­ed from the Nazi dias­po­ra in the post-war years?

2. Nazi Gold by Tom Bow­er; Harp­er Peren­ni­al [SC]; Copy­right 1997 and 1998 by Tom Bow­er; ISBN 0–06-109982–1; pp. 66–71.

Next, the pro­gram sets forth the role of Cred­it Suisse in col­lab­o­rat­ing with Nazi Ger­many, and the frus­tra­tion of the inves­ti­ga­tors in Project Safe­haven attempt­ing to neu­tral­ize that sup­port.

3a.  Nazi Gold by Tom Bow­er; Harp­er Peren­ni­al [SC]; Copy­right 1997 and 1998 by Tom Bow­er; ISBN 0–06-109982–1; pp. 66–71.

“In ear­ly Jan­u­ary of 1945 . . . new inter­cepts revealed that Swiss banks, espe­cial­ly Cred­it Suisse, were reg­u­lar­ly trans­fer­ring Ger­man loot and Gold to Argenti­na. . . .” p. 67.

3b.   Nazi Gold by Tom Bow­er; Harp­er Peren­ni­al [SC]; Copy­right 1997 and 1998 by Tom Bow­er; ISBN 0–06-109982–1; pp. 66–71.

“ . . . . The reports from Switzer­land described con­voys of trucks trav­el­ing from Munich and Nurem­berg car­ry­ing ‘large sums’ of mon­ey and secu­ri­ties to Swiss banks and the Ger­man san­i­to­ria in Davos. Oth­er reports men­tioned wide­spread loot­ing by the SS and their trans­fer of stolen prop­er­ty to Switzer­land. . . .” p. 70.

4. The Dulles/Bormann deal at the core of Aktion Feuerland–the suc­cess­ful escape of Adolf Hitler–must be eval­u­at­ed against the back­ground of Oper­a­tion Safe­haven--the attempt at inter­dict­ing the Nazi flight cap­i­tal pro­gram.

Grey Wolf: The Escape of Adolf Hitler by Simon Dun­stan and Ger­rard Williams; Ster­ling [HC]; Copy­right 2011 by Simon Dun­stan, Ger­rard Williams and Spit­fire Recov­ery Ltd.; ISBN 978–1‑4027–8139‑1; pp. 99–100.

. . . . Oper­a­tion Safe­haven was imple­ment­ed on Decem­ber 6, 1944, with the aim of track­ing the move­ment of Nazi loot and assets around the world and locat­ing those hid­den in neu­tral coun­tries. How­ev­er, for Roo­sevelt and Mor­gen­thau this plan had a wider pur­pose. They need­ed con­crete evi­dence of ille­gal­i­ty to bring against the major Amer­i­can cor­po­ra­tions that had trad­ed with Nazi Ger­many and those mem­bers of the polit­i­cal estab­lish­ment who were sym­pa­thet­ic to the Nazis: men such as the cryp­to-Nazi Hen­ry Ford: Joseph P. Kennedy Sr., for­mer U.S. ambas­sador to Lon­don; and John D. Rock­e­feller Jr., son of John D. Rock­e­feller Sr., the founder of Stan­dard Oil and advo­cate of eugen­ics. Some of these cor­po­ra­tions and indi­vid­u­als had tried to under­mine the New Deal and desta­bi­lize Roo­sevelt’s admin­is­tra­tion dur­ing the 1930s.

This ambi­tious oper­a­tion sought the pros­e­cu­tion as war crim­i­nals of all those who ran the Nazi war machine and the indus­tri­al con­cerns that sus­tained it. Bankers and indus­tri­al­ists such as Abs, Schacht, Schroder, Krupp, Flick, Schmitz and a legion of oth­ers were to stand in the dock of an inter­na­tion­al tri­bunal and be judged for their actions. Once they were in open court, [Trea­sury Sec­re­tary Hen­ry] Mor­gen­thau would reveal years of inter­cept­ed doc­u­men­ta­tion, wire­tap evi­dence, and decrypts of Swiss bank codes and cables, cour­tesy of Ultra intel­li­gence via MI6. In order to redeem them­selves, the defen­dants would have to reveal their deal­ings with Amer­i­can cor­po­ra­tions such as Ford Motor Com­pa­ny, Gen­er­al Motors, and Stan­dard Oil. All the com­pa­nies and banks found to have trad­ed with the ene­my would then face the full rig­or of the law in the Unit­ed States. It was an ele­gant plan for revenge, legit­imized by the vic­to­ry of good over evil on the bat­tle­field. . . .

5. As an attor­ney for Sul­li­van & Cromwell, Allen Dulles was deeply involved with the trea­son by Amer­i­can cor­po­ra­tions. As chief of the Berne (Switzer­land) sta­tion of the OSS (Amer­i­ca’s World War II intel­li­gence ser­vice), he was in a unique posi­tion.

Ibid.; pp. 100–101.

. . . . How­ev­er, this effort required the coop­er­a­tion of OSS agents already on the ground, and in Switzer­land this was problematical–since one of the sus­pects of Oper­a­tion Safe­haven was Allen Dulles him­self, because of his exten­sive cor­po­rate con­nec­tions and his links with var­i­ous Nazi groups. Despite this dif­fi­cul­ty, the inves­ti­ga­tion nec­es­sar­i­ly focused on the gold deal­ings under­tak­en by Swiss banks. This became of major con­cern to Swiss ambas­sador Brug­gmann once he learned of Oper­a­tion Safe­haven through his indis­creet broth­er-in-law, Vice Pres­i­dent Hen­ry Wal­lace. The expo­sure of the explic­it links between Swiss banks and Nazi Ger­many would be a major poten­tial embar­rass­ment to the Swiss gov­ern­ment once the war was over; accord­ing­ly, the Swiss Secret Ser­vice alert­ed Allen Dulles about the Safe­haven inves­ti­ga­tion into his affairs. . . .

6. In what might be termed “asso­ci­a­tion by guilt,” Dulles and Bor­man­n’s peo­ple (the Third Reich) con­nect­ed.

Ibid.; p. 102.

. . . . Dulles was also tar­get­ed by Ger­man intel­li­gence, includ­ing an elite Luft­waffe code-break­ing unit des­ig­nat­ed Luft­fahrt­forschungsamt (Luft­waffe radio inter­cept unit). When Abwehr agents learned of Oper­a­tion Safe­haven through their agent Habakuk, they set about frus­trat­ing its efforts, par­tic­u­lar­ly in Switzer­land, where it was poten­tial­ly most dan­ger­ous to the ongo­ing Ger­man cap­i­tal trans­fers. The Abwehr agents passed the word to Dulles that both the British and the Amer­i­cans were inter­cept­ing his communications–as they them­selves had been, but would now no longer be able to, thanks to their reveal­ing their hand in this way. They, too, told Dulles that he was a sub­ject of inves­ti­ga­tion by the Trea­sury Depart­ment through Oper­a­tion Safe­haven. He imme­di­ate­ly changed his encryp­tion meth­ods to the more secure “one-time pad” sys­tem and from then on his mes­sage traf­fic remained secure. Tran­scrib­ing the mes­sages from the Ver­nam cipher is a labo­ri­ous hand­writ­ten process, hence Dulles’s need for the ser­vices of interned USAAF per­son­nel for encryp­tion.

Dulles also exposed Hen­ry Wal­lace as the source of the rev­e­la­tion of both the Mor­gen­thau Plan and Oper­a­tion Safe­haven to Ambas­sador Brug­gman and ulti­mate­ly to the Ger­mans. Pres­i­dent Roo­sevelt had no choice but to ditch Wal­lace and nom­i­nate the sen­a­tor from Mis­souri, Har­ry S. Tru­man, as his can­di­date for vice pres­i­dent in the upcom­ing Pres­i­den­tial elec­tion. As a com­mit­ted oppo­nent of com­mu­nism, Tru­man was far more accept­able to Dulles. . . .

Discussion

One comment for “FTR#1300 The Collapse of Credit Suisse and the Shadows of Safehaven”

  1. Five decades is a long time to keep an inves­ti­ga­tion’s find­ings under seal. It’s basi­cal­ly an ‘every­one involved will be long-dead’ time­frame. But will it be long enough to con­tain the caul­dron of scan­dal that is Cred­it Suisse? That’s one of many dis­turb­ing ques­tions raised by the recent deci­sion by Swiss par­lia­men­tary inves­ti­ga­tors into the col­lapse of Cred­it Suisse to keep the results of the inquiry secret for 50 years, far longer than stan­dard 30 year embar­go.

    Inves­ti­ga­tors insist that the 50 year pub­lic infor­ma­tion block­ade is nec­es­sary to ensure con­fi­den­tial­i­ty in its inves­ti­ga­tion. An inves­ti­ga­tion that does­n’t have the pow­er to pros­e­cute but could poten­tial­ly reveal infor­ma­tion that could be used in the many law­suits that have already opened up around the bank’s his­to­ry col­lapse and merg­er with UBS, which is now twice the size of the Swiss econ­o­my as a result.

    Nor is the inves­ti­ga­tion look­ing into wrong­do­ing by Cred­it Suisse itself, but rather its focused on the actions of Swiss reg­u­la­tors. How much did the author­i­ties know? What was Cred­it Suisse telling reg­u­la­tors and how much was it shar­ing with the gov­ern­ment? These are the kinds of ques­tions that are appar­ent­ly so sen­si­tive that a 50 year pub­lic embar­go was nec­es­sary.

    So we have to ask: why are basic ques­tions about Swiss reg­u­la­tors so incred­i­bly sen­si­tive that they had to basi­cal­ly promise almost every­one will be in the grave by the time the pub­lic learns what hap­pened? What does that tell us about not just the scan­dals still lurk­ing in Cred­it Suis­se’s accounts but the larg­er Swiss bank­ing sys­tem? And even more gen­er­al­ly, what does this tell us about the ongo­ing role dirty mon­ey plays in major inter­na­tion­al finan­cial insti­tu­tions? And then, of course, there were the rev­e­la­tions from back in April about how Cred­it Suisse is still active­ly cov­er­ing up and hid­ing from inves­ti­ga­tors the accounts of the post-war Nazi dias­po­ra on its books. How far back do the coverups go for a back like this? These are the kinds of grim ques­tions raised by the Swiss inves­ti­ga­tion’s stun­ning deci­sion:

    Reuters

    Cred­it Suisse inquiry will keep files secret for 50 years

    By John Revill
    July 16, 2023 4:09 AM CDT
    Updat­ed

    ZURICH, July 15 (Reuters) — A par­lia­men­tary inves­ti­ga­tion into the col­lapse of Cred­it Suisse will keep its files closed for 50 years, accord­ing to a par­lia­men­tary com­mit­tee doc­u­ment, a lev­el of secre­cy that has trig­gered con­cern among Swiss his­to­ri­ans.

    The doc­u­ment means the inves­ti­gat­ing com­mis­sion would hand over its files to the Swiss Fed­er­al Archives after a longer gap than the usu­al 30 years to ensure high lev­els of con­fi­den­tial­i­ty apply to the inves­ti­ga­tion, which has gen­er­at­ed huge pub­lic inter­est.

    The inves­ti­ga­tion will focus on the activ­i­ties of the Swiss gov­ern­ment, finan­cial reg­u­la­tor and cen­tral bank in the run up to the emer­gency takeover of Cred­it Suisse by UBS in March.

    The inves­ti­ga­tion is only the fifth of its kind in the coun­try’s mod­ern his­to­ry and the com­mit­tee of law­mak­ers con­duct­ing it has sweep­ing pow­ers to call on the Swiss cab­i­net, finance min­istry and oth­er state bod­ies.

    “After the com­ple­tion of the inves­ti­ga­tion, the files shall be hand­ed over to the Fed­er­al Archives and shall be sub­ject to an extend­ed pro­tec­tion peri­od of 50 years,” the com­mit­tee said in a strat­e­gy paper out­lin­ing its com­mu­ni­ca­tion pol­i­cy.

    The Swiss par­lia­ment declined to com­ment on Sat­ur­day after the 50-year require­ment was first report­ed by news­pa­per Aar­gauer Zeitung.

    The Swiss Soci­ety for His­to­ry raised con­cerns about the length of time, with its pres­i­dent Sacha Zala writ­ing to com­mis­sion head, Isabelle Chas­sot, a law-mak­er from the Swiss upper house of par­lia­ment.

    He also stressed that it is impor­tant Cred­it Suisse opens its own archives for his­to­ri­ans.

    “Should researchers want to sci­en­tif­i­cal­ly inves­ti­gate the 2023 bank­ing cri­sis, access to the CS files would be invalu­able,” Zala wrote, accord­ing to the news­pa­per.

    “Ide­al­ly, it should be pos­si­ble to secure and make acces­si­ble the archive after an appro­pri­ate pro­tec­tion peri­od has expired and, if nec­es­sary, sub­ject to his­tor­i­cal research con­di­tions,” he added.

    The com­mit­tee held its first reg­u­lar meet­ing in Bern on Thurs­day, where it stressed the con­fi­den­tial­i­ty of its pro­ceed­ings, which could include inter­views with bankers.

    Pos­si­ble pun­ish­ments for breach­ing that con­fi­den­tial­i­ty ranged from being barred from speak­ing at the com­mit­tee to being barred for six months to three years in prison and fines.

    ...

    ———-

    “Cred­it Suisse inquiry will keep files secret for 50 years” By John Revill; Reuters; 07/16/2023

    “The doc­u­ment means the inves­ti­gat­ing com­mis­sion would hand over its files to the Swiss Fed­er­al Archives after a longer gap than the usu­al 30 years to ensure high lev­els of con­fi­den­tial­i­ty apply to the inves­ti­ga­tion, which has gen­er­at­ed huge pub­lic inter­est.”

    A 50 year embar­go on the find­ings to ensure high lev­els of con­fi­den­tial­i­ty. In oth­er words, every­one involved with the cur­rent inves­ti­ga­tion is like­ly going to be dead by the time this infor­ma­tion is pub­licly released, and that assur­ance was deemed to be nec­es­sary to get the wit­ness­es to coop­er­ate. It’s the kind of extreme step that sug­gests some wild­ly scan­dalous rev­e­la­tions are expect­ed. Swiss author­i­ties know they are deal­ing with a pub­lic rela­tions night­mare. This is dam­age con­trol. And basi­cal­ly a form of cov­er up.

    And while it’s not hard to imag­ine that a bank with a rep­u­ta­tion as sor­did as Cred­it Suis­se’s would have plen­ty of nasty secrets to hide, it’s impor­tant to note that this inves­ti­ga­tion is not an inves­ti­ga­tion int Cred­it Suisse. It’s an inves­ti­ga­tion into the Swiss author­i­ties over­see­ing Cred­it Suisse, which is a big hint regard­ing why Swiss author­i­ties might be hyper para­noid about the pub­lic rev­e­la­tions to come. Because it’s one thing for the pub­lic to learn about a cor­rupt bank. It’s anoth­er to learn about a cor­rupt bank­ing sys­tem that cod­dles and pro­tects its cor­rupt banks:

    Reuters

    Cred­it Suisse crash inves­ti­gat­ed by Swiss law­mak­ers

    By John Revill and Tomasz Janows­ki
    July 11, 2023 1:07 AM CDT
    Updat­ed

    ZURICH, July 11 (Reuters) — A rare Swiss par­lia­men­tary inves­ti­ga­tion due to start this week aims to estab­lish what went wrong before the dra­mat­ic fall of Cred­it Suisse, once Switzer­land’s sec­ond biggest bank.

    The fifth such probe in the coun­try’s mod­ern his­to­ry was set up after par­lia­ment, in a large­ly sym­bol­ic vote, reject­ed the gov­ern­ment-engi­neered 109 bil­lion Swiss franc ($122 bil­lion) res­cue pack­age to enable the strick­en bank’s takeover by UBS.

    ...

    Here is what we know about the inves­ti­ga­tion and some of the ques­tions that remain about its work­ings:

    MANDATE

    The 14-mem­ber com­mis­sion will focus on the author­i­ties’ actions before and dur­ing the emer­gency takeover of Cred­it Suisse rather than its man­age­men­t’s role.

    It will exam­ine the con­duct of the Swiss cab­i­net, the finance min­istry and oth­er state bod­ies, such as finan­cial mar­ket reg­u­la­tor FINMA and the Swiss Nation­al Bank.

    The inves­ti­ga­tion is not a judi­cial process, but it may pro­vide mate­r­i­al for cas­es launched in the after­math of the col­lapse, if it uncov­ers dis­crep­an­cies or new infor­ma­tion.

    These include law­suits against FINMA over its deci­sion to write down to zero 16 bil­lion francs of AT1 bonds, and by Cred­it Suisse investors over the share swap ratio with UBS.

    KEY QUESTIONS

    A crit­i­cal ques­tion will be whether FINMA, the finance min­istry and the cen­tral bank should have inter­vened ear­li­er.

    It was appar­ent that Cred­it Suisse was in dif­fi­cul­ties over the last two years after a string of scan­dals, with cus­tomers with­draw­ing mon­ey on a mas­sive scale at the end of 2022.

    How much did the author­i­ties know? What was the bank telling the reg­u­la­tor and how much was it shar­ing with the gov­ern­ment?

    Could the cen­tral bank have done more, for exam­ple by promis­ing Cred­it Suisse unlim­it­ed liq­uid­i­ty to reas­sure cus­tomers and stem the out­flow of funds?

    OUTCOME

    The inquiry is expect­ed to sum­ma­rize its find­ings in a report, mak­ing rec­om­men­da­tions to the gov­ern­ment and par­lia­ment, and like­ly sug­gest­ing spe­cif­ic reme­dies.

    This is unlike­ly to delve into tech­ni­cal rec­om­men­da­tions, such as cap­i­tal ratios, but focus on how to make FINMA more effec­tive, for exam­ple by giv­ing it stronger pow­ers.

    It could also con­sid­er giv­ing the cen­tral bank more pow­ers to super­vise big banks, par­tic­u­lar­ly in the con­text of the new UBS hav­ing a bal­ance sheet twice the size of the Swiss econ­o­my.

    Since the com­mis­sion can­not draft new laws, any changes will have to go through par­lia­ment.

    POWERS

    The inves­tiga­tive com­mis­sion is par­lia­men­t’s most potent tool. It will have access to gov­ern­ment meet­ings’ min­utes and oth­er con­fi­den­tial infor­ma­tion and those who work for the gov­ern­ment, fed­er­al admin­is­tra­tion, the reg­u­la­tor or the cen­tral bank must attend its hear­ings.

    It is unclear whether Cred­it Suisse and UBS exec­u­tives are oblig­ed to appear if asked, but they are expect­ed to do so due to intense polit­i­cal and pub­lic pres­sure.

    The com­mis­sion has said it could not com­ment about who had appeared before it until it had com­plet­ed its work.

    BUDGET AND OPERATIONS

    The com­mis­sion has 5 mil­lion francs to set up its office, pay its mem­bers and hire out­side experts and con­sul­tants.

    The probe is expect­ed to last between 12 and 18 months, with the com­mis­sion like­ly to meet every two weeks.

    Its meet­ings will be behind closed doors and there are no plans to open them to the pub­lic or broad­cast pro­ceed­ings.

    Indi­vid­ual rec­om­men­da­tions and the over­all report will be agreed by a major­i­ty vote and the report will then be pre­sent­ed to both hous­es of par­lia­ment and after that to the gov­ern­ment.

    MEMBERS

    The com­mis­sion will be chaired by Isabelle Chas­sot, a mem­ber of Switzer­land’s upper house of par­lia­ment from the cen­trist Mitte par­ty. Her deputy is Franziska Ryser, a Green par­ty law­mak­er in the low­er house.

    The cen­trists, the Swiss Peo­ple’s Par­ty and the lib­er­al FDP have three mem­bers each. The Social Democ­rats and Greens two and the Green Lib­er­als Par­ty one mem­ber.

    All have been crit­i­cal of the author­i­ties’ han­dling of the cri­sis, call­ing for stronger finan­cial over­sight and express­ing con­cern about the result­ing UBS dom­i­nance of the Swiss mar­ket.

    ...

    ————

    “Cred­it Suisse crash inves­ti­gat­ed by Swiss law­mak­ers” by John Revill and Tomasz Janows­ki; Reuters; 07/11/2023

    “The 14-mem­ber com­mis­sion will focus on the author­i­ties’ actions before and dur­ing the emer­gency takeover of Cred­it Suisse rather than its man­age­men­t’s role.”

    What did Swiss bank­ing author­i­ties know and when did they know it? That’s the meta ques­tion of the inquiry. But it’s not a judi­cial inquiry with the pow­er to dish out pun­ish­ments. It could, how­ev­er, dig up mate­ri­als that could end up in courts. That’s anoth­er aspect of the 50 year embar­go on the com­mis­sion’s find­ings. Those are pre­sum­ably find­ings that could be very rel­e­vant to the var­i­ous law­suits to emerge from this col­lapse:

    ...
    It will exam­ine the con­duct of the Swiss cab­i­net, the finance min­istry and oth­er state bod­ies, such as finan­cial mar­ket reg­u­la­tor FINMA and the Swiss Nation­al Bank.

    The inves­ti­ga­tion is not a judi­cial process, but it may pro­vide mate­r­i­al for cas­es launched in the after­math of the col­lapse, if it uncov­ers dis­crep­an­cies or new infor­ma­tion.

    These include law­suits against FINMA over its deci­sion to write down to zero 16 bil­lion francs of AT1 bonds, and by Cred­it Suisse investors over the share swap ratio with UBS.

    KEY QUESTIONS

    A crit­i­cal ques­tion will be whether FINMA, the finance min­istry and the cen­tral bank should have inter­vened ear­li­er.

    It was appar­ent that Cred­it Suisse was in dif­fi­cul­ties over the last two years after a string of scan­dals, with cus­tomers with­draw­ing mon­ey on a mas­sive scale at the end of 2022.

    How much did the author­i­ties know? What was the bank telling the reg­u­la­tor and how much was it shar­ing with the gov­ern­ment?

    Could the cen­tral bank have done more, for exam­ple by promis­ing Cred­it Suisse unlim­it­ed liq­uid­i­ty to reas­sure cus­tomers and stem the out­flow of funds?
    ...

    But also note the oth­er dark incen­tive for keep­ing the com­mis­sion’s find­ings under wraps: the approved merg­er of UBS and Cred­it Suisse has cre­at­ed a bank­ing behe­moth twice the size of the Swiss econ­o­my. Which means this bank­ing behe­moth has also inher­it­ed all of the yet-to-explode finan­cial time bombs that may have been sit­ting on Cred­it Suis­se’s books:

    ...
    The inquiry is expect­ed to sum­ma­rize its find­ings in a report, mak­ing rec­om­men­da­tions to the gov­ern­ment and par­lia­ment, and like­ly sug­gest­ing spe­cif­ic reme­dies.

    This is unlike­ly to delve into tech­ni­cal rec­om­men­da­tions, such as cap­i­tal ratios, but focus on how to make FINMA more effec­tive, for exam­ple by giv­ing it stronger pow­ers.

    It could also con­sid­er giv­ing the cen­tral bank more pow­ers to super­vise big banks, par­tic­u­lar­ly in the con­text of the new UBS hav­ing a bal­ance sheet twice the size of the Swiss econ­o­my.
    ...

    And that brings us to the fol­low­ing Politi­co arti­cle from back in March, in the imme­di­ate wake of the bank’s col­lapse, about the results of a US Sen­ate inves­ti­ga­tion opened back in 2021 into Cred­it Suis­se’s role in facil­i­tat­ing US tax eva­sion. It was an inves­ti­ga­tion that was sim­ply look­ing into whether or not Cred­it Suisse was abid­ing by its 2014 $2.6 bil­lion plea agree­ment with the US Jus­tice Depart­ment. And, lo and behold, as inves­ti­ga­tors dis­cov­ered, it has­n’t abid­ing by the plea agree­ment at all, with bank exec­u­tives still play­ing direct roles in facil­i­tat­ing US tax eva­sion. Sur­prise:

    Politi­co

    Cred­it Suisse hid $700M from IRS, Sen­ate inves­ti­ga­tors say

    The alleged con­ceal­ment would vio­late the terms of an agree­ment the bank had with the Jus­tice Depart­ment to set­tle pre­vi­ous alle­ga­tions.

    By Ben­jamin Guggen­heim
    03/29/2023 10:27 AM EDT
    Updat­ed: 03/29/2023 12:05 PM EDT

    Cred­it Suisse con­cealed more than $700 mil­lion in accounts from the IRS, flout­ing a 2014 plea deal the bank made with the Jus­tice Depart­ment for wide-rang­ing crim­i­nal tax eva­sion, the Sen­ate Finance Com­mit­tee said in a report released Wednes­day.

    The trou­bled Swiss bank, which is being acquired by rival UBS, broke the terms of the deal when it failed to tell the Jus­tice Depart­ment about trans­fer­ring near­ly $100 mil­lion belong­ing to a U.S.-Latin Amer­i­can fam­i­ly from large undis­closed accounts to oth­er banks for almost a decade, the report said.

    The Sen­ate inves­ti­ga­tion deter­mined that Cred­it Suisse’s for­mer head of pri­vate bank­ing for Latin Amer­i­ca played a sig­nif­i­cant role in han­dling the family’s assets.

    Based on infor­ma­tion requests from the com­mit­tee, the bank iden­ti­fied 23 unde­clared accounts belong­ing to ultra-wealthy U.S. cit­i­zens with more than $20 mil­lion at the bank. The Sen­ate report not­ed that more con­cealed accounts could be uncov­ered as the bank’s review con­tin­ues.

    “At the cen­ter of this inves­ti­ga­tion are greedy Swiss bankers and cat­nap­ping gov­ern­ment reg­u­la­tors, and the result appears to be a mas­sive, ongo­ing con­spir­a­cy to help ultra-wealthy U.S. cit­i­zens to evade tax­es and rip off their fel­low Amer­i­cans,” com­mit­tee Chair Ron Wyden (D‑Ore.) said.

    The bank had paid $2.6 bil­lion under the 2014 plea agree­ment with Jus­tice.

    “Cred­it Suisse got a dis­count on the penal­ty it faced in 2014 for enabling tax eva­sion because bank exec­u­tives swore up and down they’d get out of the busi­ness of defraud­ing the Unit­ed States,” he added. “This inves­ti­ga­tion shows Cred­it Suisse did not make good on that promise, and the bank’s pend­ing acqui­si­tion does not wipe the slate clean.”

    The rev­e­la­tions pose poten­tial­ly sig­nif­i­cant prob­lems for Cred­it Suisse, which reached an agree­ment on March 19 to be bought and have its legal lia­bil­i­ties assumed by domes­tic Swiss rival UBS.

    The mas­sive merg­er of the finan­cial insti­tu­tions was has­tened by Swiss author­i­ties and reg­u­la­tors, who feared that col­lapse of Cred­it Suisse, which sus­tained bil­lions of dol­lars of loss­es in 2021 and faced sev­er­al scan­dals, could send shock­waves through the glob­al finan­cial sys­tem.

    ...

    As part of its inves­ti­ga­tion, the com­mit­tee also found that Cred­it Suisse abet­ted U.S. busi­ness­man Dan Horsky, a dual cit­i­zen who admit­ted to con­ceal­ing $220 mil­lion from the U.S. gov­ern­ment in 2016 in one of the largest crim­i­nal tax eva­sion cas­es in Amer­i­can his­to­ry.

    Cred­it Suisse bankers were aware of Horsky’s Amer­i­can cit­i­zen­ship and worked with him to obscure the own­er­ship of his accounts from the IRS, the report said.

    ———-

    “Cred­it Suisse hid $700M from IRS, Sen­ate inves­ti­ga­tors say” by Ben­jamin Guggen­heim; Politi­co; 03/29/2023

    “Based on infor­ma­tion requests from the com­mit­tee, the bank iden­ti­fied 23 unde­clared accounts belong­ing to ultra-wealthy U.S. cit­i­zens with more than $20 mil­lion at the bank. The Sen­ate report not­ed that more con­cealed accounts could be uncov­ered as the bank’s review con­tin­ues.”

    Ha! Cred­it Suis­se’s ‘review’ done at the request of US Sen­ate inves­ti­ga­tors just hap­pened to find anoth­er 23 accounts of ultra-wealthy US cit­i­zens with more than $20 mil­lion at the bank. How many more ‘sur­prise’ accounts of this nature are there hid­ing in Cred­it Suis­se’s vaults?

    But more gen­er­al­ly, what inter­nal con­trols were there at all on this kind of behav­ior? Because as we can see, when the bank paid a $2.6 bil­lion fine in 2014 over US tax eva­sion, that plea agree­ment includ­ed exten­sive promis­es by the bank exec­u­tives that they would get the bank out of the busi­ness of US tax eva­sion. And yet, as inves­ti­ga­tors found, Cred­it Suisse exec­u­tives were play­ing a direct role in the ongo­ing eva­sion:

    ...
    The trou­bled Swiss bank, which is being acquired by rival UBS, broke the terms of the deal when it failed to tell the Jus­tice Depart­ment about trans­fer­ring near­ly $100 mil­lion belong­ing to a U.S.-Latin Amer­i­can fam­i­ly from large undis­closed accounts to oth­er banks for almost a decade, the report said.

    The Sen­ate inves­ti­ga­tion deter­mined that Cred­it Suisse’s for­mer head of pri­vate bank­ing for Latin Amer­i­ca played a sig­nif­i­cant role in han­dling the family’s assets.

    ...

    “At the cen­ter of this inves­ti­ga­tion are greedy Swiss bankers and cat­nap­ping gov­ern­ment reg­u­la­tors, and the result appears to be a mas­sive, ongo­ing con­spir­a­cy to help ultra-wealthy U.S. cit­i­zens to evade tax­es and rip off their fel­low Amer­i­cans,” com­mit­tee Chair Ron Wyden (D‑Ore.) said.

    The bank had paid $2.6 bil­lion under the 2014 plea agree­ment with Jus­tice.

    “Cred­it Suisse got a dis­count on the penal­ty it faced in 2014 for enabling tax eva­sion because bank exec­u­tives swore up and down they’d get out of the busi­ness of defraud­ing the Unit­ed States,” he added. “This inves­ti­ga­tion shows Cred­it Suisse did not make good on that promise, and the bank’s pend­ing acqui­si­tion does not wipe the slate clean.”

    ...

    As part of its inves­ti­ga­tion, the com­mit­tee also found that Cred­it Suisse abet­ted U.S. busi­ness­man Dan Horsky, a dual cit­i­zen who admit­ted to con­ceal­ing $220 mil­lion from the U.S. gov­ern­ment in 2016 in one of the largest crim­i­nal tax eva­sion cas­es in Amer­i­can his­to­ry.

    Cred­it Suisse bankers were aware of Horsky’s Amer­i­can cit­i­zen­ship and worked with him to obscure the own­er­ship of his accounts from the IRS, the report said.
    ...

    And, of course, that’s just US tax eva­sion. There’s a whole lot of oth­er poten­tial finan­cial crimes the bank has pre­sum­ably been involved with too in recent years. And then there’s the still-to-be-dis­cov­ered crimes from decades past, like the ongo­ing obfus­ca­tion of Nazi-linked accounts. Decades of some of the worst finan­cial crimes imag­in­able are poten­tial­ly at risk of expo­sure here. It’s not hard to imag­ine that Swiss inves­ti­ga­tors would sim­ply rather not know. Espe­cial­ly if know­ing risks the integri­ty of the Swiss bank­ing sys­tem which is appar­ent­ly the case now that UBS has assumed all of those nasty dark secrets and grown into a finan­cial colos­sus.

    It all points towards per­haps the most potent sell­ing point of the much vaunt­ed adher­ence to strict secre­cy with the Swiss finan­cial sys­tem: You don’t have to wor­ry about an end to Swiss bank­ing secre­cy. An end to Swiss bank­ing secre­cy would effec­tive­ly be the end of the Swiss bank­ing sys­tem. In oth­er words, don’t be shocked if that 50 year embar­go gets a few exten­sions. We’re well into Too Big To Fail ter­ri­to­ry here.

    Posted by Pterrafractyl | July 18, 2023, 2:19 pm

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