Swiss Bank Accounts Not So Secretly Secure Anymore
LIANE HANSEN, host:
This is WEEKEND EDITION from NPR News. I'm Liane Hansen.
Secret Swiss bank accounts aren't what they used to be. This week, Swiss bank UBS agreed to provide the U.S. government with details of more than 4,000 accounts. The IRS is going after clients suspected of hiding funds in UBS banks in Switzerland.
Roben Farzad, senior writer for Business Week, joins us now from member station WLRN in Miami to talk about this and other economic news. Hi, Roben.
Mr. ROBEN FARZAD (Senior Writer, Business Week): Liane, thanks for having me.
HANSEN: Sure. You pulling all your money out of that secret Swiss bank account?
Mr. FARZAD: Oh, you know me.
(Soundbite of laughter)
Mr. FARZAD: Living like James Bond.
HANSEN: That's right. My secret account is the piggy bank under the bed.
(Soundbite of laughter)
HANSEN: But talk a little bit about this. Because this, I mean, Swiss banks have been really notoriously tightlipped about their client lists. It's almost a cliche. What happened?
Mr. FARZAD: It is almost a cliche. If you say something like, well, he was known to carry several Swiss bank accounts…
Mr. FARZAD: …it immediately confers this kind of a mysticism or international man of mystery and danger. And a lot of that was de-exoticized this week when UBS was forced to give up just under 5,000 client names, and that's the unthinkable. If a Swiss banker were to just volunteer names, I think that's punishable by a prison sentence in Switzerland, so sacrosanct are the secrecy laws there. So, this shows you how much that was shattered in just a matter of a few days.
HANSEN: Yes. So, what happens to the clients and to the banks themselves?
Mr. FARZAD: The clients are going to fight this tooth and nail, but a couple, a handful have already fessed up and said we are guilty as charged. And the government, in addition in the United States, put through some sort of amnesty project in the carrot-and-stick tradition.
Because the signaling is more important. In addition to getting their back tax revenue, I think it's going to make other firms step forward and find IRS religion and say, look, we're going to take you up on your amnesty offer, and so the government gets a two-for-the-price-of-one. It gets to flex its muscles and show that nothing is above the U.S. law, especially where Treasury is concerned. And, two, we can look forward to indeed getting more revenue down the line now that their wall of secrecy has been shattered.
HANSEN: Let's talk a little bit about the markets this week. Did you see dark clouds or a silver lining?
Mr. FARZAD: Well, the market, however monolithic we want to look at this thing, is at a year high. I mean, this has been a spectacular run if you think about it. I saw a stat somewhere that over the span of time where the economy hemorrhaged two million jobs, the market's gained 50 percent. That's unprecedented. And this is the best, I think, six- or seven-month run since 1938. So, it shows you how far we've come from a perception standpoint. Back in March, people really thought that we were on the brink of absolute abysmal calamity. And what's noteworthy is that riskier asset classes have outperformed the safe and stable security. So, that flies in the face of this whole reckoning argument, that we've been so chastened, that people are going to be husbanding cash under their mattresses for the foreseeable future. So, at least that's promising but maybe we've gotten a tad ahead of ourselves.
HANSEN: There were new numbers from the Mortgage Bankers Association this week. More than 13 percent of American homeowners with a mortgage have either fallen behind on payments or are already in foreclosure. What effect is this having on the U.S. economy as a whole?
Mr. FARZAD: It's a significant overhang going forward. We as an economy really binged on housing, really had this - almost this real estate new paradigm fetish, and I don't think that kind of excess inventory is going to be worked off in a year or two. We have several other shoes to drop in terms of delinquencies. There is a certain level of amnesty right now between the banks and delinquent borrowers, for them not to foreclose, for them to maybe seek out remediation. And you're going to see a lot of these things fail over the next year or two. The question is how much has the market already priced that in.
The market was pricing in, once again, calamity just a few months ago, and now it seems that things aren't going to be as horrific as expected. So, it remains to be seen.
HANSEN: Roben Farzad, senior writer for Business Week, joined us from member station WLRN in Miami. Roben, thanks a lot.
Mr. FARZAD: Thank you, Liane. My pleasure.
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