Meltdown

[Coopmv]

Will the Swiss banking sector survive when all the hot money from wealthy Europeans and Americans bail out of their secret Swiss accounts? 

David Prosser: The end of Swiss banking? If so, it's about time too

Saturday, 14 March 2009

Outlook: So the credit crunch has achieved something the world had been trying to do for more than 70 years: getting the Swiss to give up more information on who has stashed what in the country's secret bank accounts.

It's not been the best few days for those keen to keep their affairs hidden from the prying eyes of their home country's tax authorities. On Thursday, Liechtenstein and Andorra said they were toning down their bank secrecy laws. Yesterday, Austria, Luxembourg and – the big one – Switzerland all said they would follow suit.

What has spooked these countries like never before is the threat of a concerted international attack on tax havens from the rest of the world. A crackdown on nations that enable other countries' residents to avoid – and evade – tax is one of the topics up for discussion at this weekend's meeting of the G20 nations' finance ministers.

Switzerland's banks are thought to have around $2 trillion stashed away on behalf of international depositors. Until now, they've got away with refusing to share the information about these accounts on the basis of a legal technicality concocted by Swiss legislators in 1934 (in the same laws as those that threaten heavy penalties, including prison sentences, for Swiss nationals who disclose banking secrets). Under Swiss law, the only circumstances in which banks can provide other countries with details of customers' accounts is if they receive a detailed claim about a specific individual with precise information about criminality of which they are suspected. Tax evasion – illegal everywhere else in the world but only a civil matter in Switzerland – doesn't count, by the way.

Understandably, many countries feel disgruntled about their citizens – the wealthiest of them, naturally – hiding their cash in Switzerland in order to get away with paying less tax back home. The US alone estimates it loses $100bn in tax revenues each year because of banking secrecy in Switzerland and other tax havens. The TUC reckons the equivalent figure for the UK might be £4bn a year.

Hans-Rudolf Merz, the Swiss Finance minister, said yesterday that he thought international co-operation on tax matters was more important these days, "given the globalisation of financial markets and in particular against the background of the financial crisis".

Mr Merz might, if he was being honest, have added that a $780m fine just copped by UBS, one of Switzerland's biggest banks, has also focused minds. UBS had to cough up the cash after an American investigation into US nationals thought to be hiding money through the bank. There's an ongoing row about 52,000 clients of UBS the Americans want to know more about.

The Swiss also don't like the idea of their names going on to an OECD blacklist, which was a distinct possibility before yesterday's concessions, though quite how it has avoided being named and shamed in this way until now is a mystery to most people.

The question now, of course, is just how honourable Switzerland's intentions really are. The Swiss have promised to share more information, making judgements on what they'll share on a case by case basis. If that's just hot air – and they're still muttering about tax amnesties and other bells and whistles – let's hope the OECD holds them to account sooner rather than later. If it's a genuine commitment, this might spell the end of Swiss banking, 75 years after the industry was invented.

That, by the way, might have one benefit for Switzerland. It is increasingly exercised about the soaring value of its currency, particularly against the euro – if all those tax evaders, avoiders and so on now depart for tax havens new, at least the Swiss franc might come down in value.

That's by the by, however. Imagine what good an extra £4bn of tax revenue could do in this country, if the TUC's estimate is correct. Let alone the $100bn the US reckons it might net annually. Why on earth should people get away with this level of tax evasion, let alone enjoy the acquiescence of a foreign government that purports to be a good friend and neighbour?

[Coopmv]

It is pure fantasy that there will not be more massive job losses in Switzerland when all the wealthy Americans and Europeans repatriate their money in order to make peace with the tax departments in their respective countries, i.e. pay up on their overdue tax.  If banking secrecy is gone, why bother with Switzerland?  We Americans feel good about the Swiss sharing our brotherly pains.  Join the Vioxx Club, anyone?   

UBS cutting 5,000 management

Sun Mar 15, 9:21 am ETjobs:report
         
GENEVA (Reuters) – Switzerland's biggest bank UBS (UBSN.VX) plans to cut up to 5,000 senior and management jobs in the next few weeks, Swiss weekly SonntagsZeitung said on Sunday.

It said up to 2,500 management positions could go in UBS's dominant and profitable wealth management division, which accounts for 50,000 of the bank's total 77,000 staff.

A UBS spokesman declined to comment on the report.

Last week UBS said it was restructuring its Swiss business structure into four regions from eight, and trimming its top management. But it said the changes did not mean any more job cuts than the 600-800 positions it already plans to cut in Switzerland as part of thousands of job losses globally.

In February UBS said after announcing a record loss it would cut 2,000 jobs to take staff to about 75,000 by the middle of this year.

UBS is struggling to rebuild its once powerful brand and focus on its core Swiss business after massive investments in risky U.S. assets forced it to make more writedowns than any other European bank and accept government backing.

[Coopmv]

My long-term investment in Novartis shares has been doing just fine.  But its home country is not ...

March 17, 2009 - 10:10 AM    Recession expected to worsen
The recession in Switzerland will be worse than expected in 2009 with the economy shrinking by 2.2 per cent, government forecasters say.
The State Secretariat for Economic Affairs (Seco) has adjusted its previous prediction that the gross domestic product would decline by 0.8 per cent, in a report released on Tuesday, but says there will be a 0.1 per cent recovery as of 2010.

Unemployment, which rose to 3.4 per cent in February, is expected to increase to 3.8 per cent in 2009 as a whole and to 5.2 per cent in 2010.

"The outlook of the global economy, already gloomy at the end of last year, has once again deteriorated considerably since the start of 2009," a Seco statement said.

Seco said it was aligning its forecast to that of the Swiss central bank which recently predicted GDP would decrease by up to three per cent.

Seco noted that the positive effects of the economic support measures taken around the world would take root "progressively" and stabilisation in the international financial markets "gives hope" that the global financial crisis will eventually be curbed. But a worsening in the situation globally would lead to an even greater recession in Switzerland.

Swiss industry suffered in the fourth quarter of 2008, the Federal Statistics Office said on Tuesday. Compared to the same quarter in 2007, production decreased by 5.9 per cent and sales also receded by 1.7 per cent.

[Coopmv]

Another new member to the Recession Club ...

Singapore recession to deepen before Q4 rebound:
Posted: 16 March 2009 1310 hrs

SINGAPORE - Singapore is expected to slide deeper into recession this year before staging a weak recovery in the final quarter and registering mild growth in 2010, a central bank survey showed on Monday.

Gross domestic product (GDP) is likely to fall 8.5 per cent in the quarter to March from a year ago, more than double the 4.2 per cent shrinkage in the fourth quarter of 2008, according to the survey of professional economists.

Singapore slipped into recession in the third quarter of last year ahead of its Asian neighbours.

The GDP decline would likely continue in the second and third quarters this year at 6.9 per cent and 4.6 per cent, respectively, before output grows at 0.5 per cent in the final three months, the survey showed.

For 2009, the economy was expected to shrink by 4.9 per cent - just within the government's forecast contraction range of 2.0 and 5.0 per cent - which would make it the worst recession since independence in 1965.

A recovery is expected in 2010, with the economists forecasting an average of 3.3 per cent growth, the poll showed.

Singapore's trade-driven economy grew just 1.1 per cent last year from 7.8 per cent in 2007 after a worldwide economic downturn weakened demand for its exports and fewer travellers visited the country.

Manufacturing is likely to bear the brunt of the downturn, with the sector forecast to fall by 19.6 per cent in the first quarter this year, followed by the financial services sector, which is expected to drop 11 per cent.

Exports are projected to plunge 27.4 per cent during the quarter, according to the survey of 20 professional economists and analysts. Singapore's exports declined by 35 per cent, the largest drop on record, in January from a year earlier.

February figures will be released on Tuesday, with DBS Bank saying it expects exports to have fallen 23.6 per cent year-on-year. "The general expectation is that it will be another dreadful month," it said in a market commentary.

Minister Mentor Lee Kuan Yew warned this month that GDP may contract by as much as 10 per cent this year if exports continue to fall sharply. - AFP/vm

[ezodisy]

So Coop, how do you see things 5 years away? About the same as now?

[Coopmv]

So Coop, how do you see things 5 years away? About the same as now?

I am not smart enough and do not pretend to be smart enough to predict the future.  We cannot even forecast interest rate a year from now with much accuracy.  If the talking heads are wrong, are they going to be held responsible for anything such as your bad investment decisions?   

[ezodisy]

If the talking heads are wrong, are they going to be held responsible for anything such as your bad investment decisions?   

I think you know the answer to that. Most of those "talking heads" (that's a really irritating term by the way) are wrong when they speak on Bloomberg, CNBC, FOX, CNN and so on. Most. You could of course pay attention to the ones who have been correct, but that doesn't seem to be something you're interested in, and instead just want to dump every forecaster into the same pile (the "talking heads"). The funny thing is that there have been many, including Oscar, who called this spot on, so why don't you take advantage of it instead of continuing to imply that they're all idiots?

[BachQ]

UN predicts that the world population will balloon to 9.2 billion people by 2050 (up from nearly 6.8 billion today).

[BachQ]

MSNBC:U.S. banks suffer 149% rise in bad loans

[BachQ]

California jobless rate hits 10.5%, a 26yr high

California Unemployment Office Hiring 400 New Positions to meet Skyrocketing Demand

The demand for unemployment in California has become so high that the unemployment office is planning to hire hundreds of people to keep up.  The Employment Development Department is hiring for 400 positions because of a record number of unemployment claims from California residents, and more jobs may be opening in the future. "It's a very huge workload issue and certainly a great amount of work," said Lori Levy from the EDD. "We have never in California seen a month [with] over 500,000 initial claims in one month."

[BachQ]

Even Cave Dweller Can't Escape Recession: Between a Rock & a Hard Place, Man Living in Cave Faces Foreclosure ABC News: For nearly five years, Curt Sleeper and his family have lived in a cave. His mortgage is about to come due and, like millions of other Americans, he can't refinance.

[Lethevich]

Geithner Relies on Investors for $1 Trillion Plan

An expensive, but seemingly potentially useful thing to do. Instead of continually throwing money at a problem, simply make one payment to move the problem away from where it is most damaging.

[Coopmv]

Geithner Relies on Investors for $1 Trillion Plan

An expensive, but seemingly potentially useful thing to do. Instead of continually throwing money at a problem, simply make one payment to move the problem away from where it is most damaging.

Only time will tell if this latest move will work ...

[Coopmv]

High priced American lawyers will not be able to stop the Swiss banking secrecy from being torn down once and for all.  With EU and the US on the same page and ready to take coordinated actions,  the impact on the Swiss economy will be significant and lasting ...    

Switzerland summons German ambassador
17 March 2009 | 09:32 | Source: EuroNews 

BERN -- Switzerland and Germany are heading for a showdown after the German Finance Minister cast doubt on Bern's commitment to dealing with banking secrecy.

The German ambassador has been summoned to the Swiss foreign ministry in Bern.

It comes after Peer Steinbrück suggested Switzerland and Austria might not be fully committed to applying OECD transparency rules:

"All they need to know is that an OECD blacklist exists. If that makes people nervous and they ask themselves if they are likely to end up on that list well, then things start moving." he said in an interview.

Swiss officials described Steinbruck's remarks as unacceptable. President Hans-Rudolf Merz:

"For all those taxpayers who are Swiss residents, the banking protection will remain in place. No one can stick their nose into our bank accounts. However, banking secrecy laws cannot be used to cover up fraud."

Pressure from the G20 last week prompted promises of transparency from several countries, including Switzerland, Austria and Liechtenstein.

Switzerland in particular has been in the spotlight since US officials demanded its biggest bank, UBS, hand over the name of 52,000 clients suspected of tax fraud.

The Swiss government has hired a team of American lawyers to defend its position. 

[Coopmv]

California jobless rate hits 10.5%, a 26yr high

California Unemployment Office Hiring 400 New Positions to meet Skyrocketing Demand

Not surprising.  CA was in big trouble back in the early 90's due to that last real estate bubble, though its economic problems were less severe.   It has a very diverse economy and is still the 7th world's largest economy.  It will bounce back over time. 

[Coopmv]

MSNBC:U.S. banks suffer 149% rise in bad loans

One has to wonder if UBS will continue in its current downward spiral.  As a US taxpayer, I am quite annoyed at any payments US government made to foreign banks just because they were dumb enough to enter any collateral agreements with the likes of AIG or Lehman Brothers. 

[ezodisy]

President Hans-Rudolf Merz:

"For all those taxpayers who are Swiss residents, the banking protection will remain in place. No one can stick their nose into our bank accounts. However, banking secrecy laws cannot be used to cover up fraud." 

exactly. The self-righteous yanks and europeans can piss off

Geithner Relies on Investors for $1 Trillion Plan

An expensive, but seemingly potentially useful thing to do. Instead of continually throwing money at a problem, simply make one payment to move the problem away from where it is most damaging.

I like the "seemingly potentially" part Lethe.

[Lethevich]

exactly. The self-righteous yanks and europeans can piss off

I like the "seemingly potentially" part Lethe.

I'll ditch the seemingly when I get a doctorate 0:)

[ezodisy]

Fibo, some time if you have 80 minutes to spare there's an outstanding 8 part Schiff lecture here which without doubt is the best thing I've heard from him, funny and brilliant

http://www.youtube.com/watch?v=eSVpio-3eBU

[Coopmv]

exactly. The self-righteous yanks and europeans can piss off

I like the "seemingly potentially" part Lethe.

This has more to do with fairness than being self-righteous.  Again, if you have more money than you know what to do with, you will not be hanging out in this forum.  Lets face it, why shouldn't some tycoons in your country not pay their fair shares of taxes?  This is not an American or European issue.  The Swiss have done this for too long - helping the tax cheats to avoid paying their fair shares of taxes to their countries ...