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Tax expert James Henry says the Credit Suisse settlement is not a real victory for citizens looking to hold bankers accountable

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JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.

We all remember the 2008 financial crash. But now the first big bank since that meltdown has been charged with a criminal offense. Swiss bank Credit Suisse pleaded guilty to assisting clients with evading taxes. They will have to pay a fine of $2.6 billion to settle the case.

Now joining us to dig deeper into this story is our guest, James Henry. He’s a leading economist, attorney, and investigative journalist who is a regular contributor to The Real News.

Thanks for joining us, James.


DESVARIEUX: So, James, this is really big news. I mean, a lot of people are buzzing about this. But let’s lay out the key points that you make, number one being Credit Suisse’s fine is equal to one-quarter of their earnings. Two-point-six billion dollars sounds like a lot of money. But can you put that in perspective for us?

HENRY: Yeah. I think, you know, the fact that it’s just three months of Suisse–their earnings–you know, this is a bank with 45,000 employees. It has about $1.4 trillion of client assets under management. Its own assets are about $1 trillion. The second-largest Swiss bank. It’s been around forever.

And it’s been engaged in these kinds of practices forever, involving helping wealthy Americans and wealthy people from all over the planet put their money in Switzerland tax-free. You know, they set up special teams for this that came, in the case of the U.S., to, you know, roaming around to art conventions and, you know, cultivating wealthy people. And they accumulated at least 22,000 clients. So, you know, this has been going on and been very lucrative activity for the bank.

In that context, this $2.6 billion fine, you know, is not a huge number. I mean, just yesterday there was a divorce settlement in Swiss courts between a Russian oligarch and his wife, and she had to settle for $4.5 billion. So this is the kind of perspective we need.

There’s an awful lot of wealth on the planet. This is a huge financial institution. And as the current CEO said after this settlement was announced, this will have a trivial, minor impact on our performance.

DESVARIEUX: Alright. Let’s move on to the next point. Credit Suisse gets to keep their bank license. What’s going on here?

HENRY: Well, everybody expected that if they were actually required to plead guilty, that this would actually make a difference. But the whole point of that was if they had to plead guilty–you know, if you were a financial institution that pled guilty to a felony in Switzerland, you would probably lose your license almost automatically. You know. And for a while there was talk about the New York Department of Financial Services coming in and actually questioning whether Credit Suisse would be allowed to continue to function, because New York is such an important market for them to have access to. You know, that was a lot of leverage.

But at the end of the day, they got the Federal Reserve and the New York Department of Finance, under a guy named Lawsky, to agree not to remove Credit Suisse’s license here. They do have a monitoring program for a couple of years, but it’s not clear what that amounts to. So that was another major fail of this settlement agreement is that there was–you know, the plea bargain actually didn’t have any teeth.

But I think in many ways the other two aspects of this which are disturbing are even more interesting.

DESVARIEUX: Well, let’s move on to the third point, then, and talk about Credit Suisse’s leadership remaining. Who’s actually staying on board?

HENRY: Well, both the current chairman of the board, who’s been there for some time, and the American CEO, Brady Dougan, who really runs the place, he’s been a Credit Suisse employee for about 25 years, first at First Boston, and then he became CEO in 2007. So all this misbehavior has really happened on his watch. And yet he’s denied any knowledge of it. You know. And the chairman of the board today issued a statement in which he said that they were “white as snow”.

So, you know, senior executives are not only not–of course they’re not going to jail in this thing. They’re still to big to jail. But, you know, they’re both keeping their jobs, and their stock options today are more valuable than ever. They’re going up. Today was a great day on the stock market for Credit Suisse. It appreciated at 1.4 percent in market cap. So it almost paid back about half of the fine, just today’s stock market increase.

DESVARIEUX: Wow. You also mentioned that the deal protects Swiss bank secrecy. Can you give us some real examples of how Swiss bank secrecy even works?

HENRY: Well, traditionally, if you have your accounts in a Swiss bank, they are reluctant to cooperate with what’s called ordinary tax evasion inquiries. You know, they do provide on a kind of case-by-case basis–if the Justice Department comes and says, we have a big drug dealer from Mexico who’s got his accounts here, and they meet the standards of proof, they will release information about that fellow’s accounts. But if the charge is just involving, you know, sort of run-of-the-mill tax evasion, that isn’t really a crime under Swiss law and they don’t cooperate.

Now, there’s a Swiss tax treaty that’s been before the Senate for some time. It’s now being, you know, held up by Rand Paul, who actually wants to protect Swiss bank secrecy. But, you know, this story just gets weirder and weirder. But the basic story is that the Justice Department could–and I think Senator Levin, who’s been proposing–has been pushing this, expected them to. They could have insisted on the disclosure of U.S. taxpayers as a group, rather than putting the U.S. Department of Justice through the arduous process of requesting on a case-by-case basis [crosstalk] don’t have those names to request. So, you know, that’s effectively–.

I mean, the BBC last night had a report that said, incredibly, that this was the end of Swiss bank secrecy. It’s not the end by any means. You know, if anything, the Justice Department has just said, you know, we will sign deals that protect Swiss bank secrecy.

DESVARIEUX: Alright. And James, in number five you mention that in the end this is a lousy deal for U.S. citizens. Why is that?

HENRY: Well, first of all, there’s a question about the rule of law. You know, this should be–the rule of law is something that we all need, whether we’re Republicans or Democrats or progressives or radicals. And this basically, I think, sets up a situation in which, you know, wealthy institutions, influential institutions with lots of lobbyists and jobs to offer to, you know, previous members of the Obama administration, you know, they’re able to get off–very light touch in this situation.

Up here in New York we have this case of Ms. McMillan, who’s just been sentenced for being involved in the Occupy protest and, you know, getting in a scuffle with a cop to, you know, a felony for–she has to serve three months in jail and she will have five years of probation. You know. So there’s just this dichotomy between, you know, kind of the rest of us and this ruling elite.

If you look behind the covers here, you find that the influence within the Obama administration of the Swiss banking industry is just incredible. And, you know, Holder not only is the guy who gave the pardon to Marc Rich–I mean, he basically signed off on the pardon for Marc Rich back in 2000 under Clinton when he was assistant attorney general. Then he went off to Covington & Burling, which is a big D.C. law firm, and he was–one of his clients, or one of Covington’s clients, was UBS, the big Swiss Bank Corp. He had to recuse himself from that case when he became Obama’s attorney general. And then, you know, his chief legal counsel at the IRS, William Wilkins, used to be a partner at Wilmer Hale, another big D.C. law firm, and he was actually a registered foreign representative for the Swiss Bank Corp. back in the 1990s–for the Swiss Bankers Association (excuse me). You know. And then you also have a U.S. Treasury secretary who was running Citibank’s global wealth management department back in 2006, 2007. So, you know, the top of the pie may be Robert Wolf, who was a big fundraiser for Obama in 2008. He was also in charge of UBS North America. You know, they’re golfing buddies.

So, you know, the pervasive kind of presence of the Swiss lobby within the administration, I think, at the very least, you know, these people are not on the take. I think the way to think about it is that, you know, these are people that they understand. They play golf with them. They talk to them all the time. They speak the same language. And it’s very hard to look across the table and then insist that someone do jail or that their bank loses its license to operate. You know, it’s much more civil to settle for a fine that most Americans will think is a really big number when it isn’t.

DESVARIEUX: Alright. James Henry, regular contributor to The Real News, thank you for your analysis.

HENRY: Yeah. You’re welcome.

DESVARIEUX: And thank you for joining us on The Real News Network.


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James S. Henry is an investigative economist and lawyer, a Global Justice Fellow at Yale University, and a Senior Advisor at the Tax Justice Network. Previously, James served as Chief Economist at the international consultancy firm McKinsey & Co. As an investigative journalist his work has appeared in numerous publications like Forbes, The Nation and The New York Times.