Tag Archive: Banking Fraud


One of my readers wrote to Senator Cantwell, ((D) Washington State), about the concerns my reader has about the financial area, particularly after reading Shelley Stark’s Hidden Treuhand book.  This is the response Senator Cantwell sent to her that she sent to me to post for the interest of other readers.  -GFS

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From: Maria_Cantwell@cantwell.senate.gov [mailto:Maria_Cantwell@cantwell.senate.gov]

Sent: Thursday, January 21, 2010 10:32 AM

To:

Subject: From the Office of Senator Cantwell

Dear _____________,

Thank you for contacting me to express your concerns about the need for regulatory reform of the country’s financial markets.  I appreciate hearing from you on this important matter, and I sincerely regret the delayed response.

The recent crisis in our housing and financial markets has shaken the confidence of the American people.  I recognize the tremendous burden that Washington families and businesses have faced in recent months and I remained concerned about the lack of transparency and oversight in U.S. financial markets.  Like you, I am concerned about the stability of our country’s financial markets and believe that regulatory reform is necessary.  Reckless subprime mortgage lending resulted in people being kicked out of their homes, hurt small banks, and nearly collapsed large too-big-to-fail banks.  Businesses are failing and laying workers off because they cannot access the credit they need.  Community banks are not lending and prospective borrowers are left with few or no options.  It is clear that one of the primary causes of the economic meltdown was the opaque nature of the unregulated derivatives market.

Derivatives are a complex financial tool that, when adequately regulated, can be used to manage commercial risk.  For instance, electric utilities and airlines purchase derivatives to hedge against potential future price increases of natural gas or jet fuel.  Corporations can purchase interest-rate derivatives to hedge against fluctuations in interest rates that can increase input costs.  However, derivatives were also being used by speculators and big banks to make off-book bets on everything from home prices to foreclosure rates, energy prices, and even food prices. Trillions of dollars worth of unregulated derivatives tied to credit markets and complex financial mortgage-based instruments fueled the crisis.

Prior to 2000, no federal law exempted derivatives from being traded on safe, transparent regulated central exchanges overseen by the Commodity Futures Trading Commission (CFTC).  This oversight protected the public from the inherent risk posed by derivatives and from the chaos that could result from unscrupulous or reckless trading.  However, in 2000, major financial firms sought and received an exemption from all regulation of a massive class of derivatives, including preemption from state gambling laws.

The lack of any regulations at the federal level meant that, in effect, the 2000 law changes enabled rampant derivatives speculation that culminated in the economic collapse of 2008.  In 2000, when the deregulation law passed, the derivatives market was already $94 trillion.  After deregulation, the derivatives market ballooned to over $598 trillion by 2008.  Major Wall Street firms grew too big to fail because they were making massive bets on unregulated derivatives with no capital to back up those bets.  When these bets didn’t pay up, it was up to American taxpayers to provide the capital to bail them out.  We cannot allow this to happen again.

That is why I am fighting to ensure that we have the strongest possible reforms over our financial markets.  Last year, I worked with the Administration on proposing strong regulatory controls on these markets, including requiring transparency in derivatives trading and restricting market manipulation.  After numerous conversations with the administration, I was pleased when they announced support for some of the proposals I had called for, including clear support for bringing the unregulated derivatives market under full regulation and oversight.

On September 17, 2009, I introduced the Derivatives Market Manipulation Prevention Act of 2009 (S. 1682), which would make it easier for the CFTC to prevent, deter, and enforce cases of market manipulation in derivatives.  Current law makes it very difficult for the CFTC to effectively meet its mandate to enforce and deter market manipulation.  This is because current law requires the CFTC to meet a more rigorous standard to prove market manipulation than other financial market regulatory agencies such as the Securities and Exchange Commission (SEC), the Federal Energy Regulatory Commission (FERC), and the Federal Trade Commission (FTC). My bill would establish a bright line so that the CFTC can effectively enforce and deter market manipulation in commodity futures and derivatives markets.

On November 10, 2009 I introduced S. 2763, a bill to repeal the state gambling law preemption on unregulated derivatives.  My bill would empower state gambling regulators and attorney generals to examine unregulated derivatives trading and take appropriate action to protect citizens from practices which can harm the foundations of our economy.  As Congress considers comprehensive legislation to close loopholes and exemptions from federal derivatives regulation, states should no longer be prohibited from also protecting their citizens.

I will be working with my colleagues to ensure Congress passes the strongest financial market reform bill possible.  We must ensure that large financial firms serve as a force to create jobs and facilitate entrepreneurship, and prevent reckless use of unregulated financial products that can bring down the entire financial system.

Please be assured that I will continue my efforts in the U.S. Senate to bring transparency to government and to the financial markets by fighting for smart, effective regulation and oversight so we do not face a catastrophe like this again.

Thank you again for contacting me to share your thoughts on this matter.  You may also be interested in signing up for periodic updates for Washington State residents.  If you are interested in subscribing to this update, please visit my website at http://cantwell.senate.gov.  Please do not hesitate to contact me in the future if I can be of further assistance.

Sincerely,

Maria Cantwell

United States Senator

For future correspondence with my office, please visit my website at

http://cantwell.senate.gov/contact/index.html

 Someone wrote and asked me that today.  First I want to assure you that I am not being paid one penny in fees, nor have I received any gifts or even any non-profit organization sponsored trips to Lichtenstein for talking about this book.  (If you’ve been reading my blog for a while, you’ll get the humor intended.)

The author, Shelley Stark is not a relative, business associate or long time friend.  In fact, I’ve never met her in person.  When she wrote her first article for Truthout while completing her research and writing of Hidden Treuhand, I wrote about her article and upcoming book in my blogs.  When I read what she had to say, a light went on for me, as suddenly I could see how the Hidden Treuhand could be used for the benefit of greedy individuals or corporations.  As you know I’ve been keeping my radar on to alert for greedy and corrupt corporations.  

Shortly before the book was published Ms. Stark saw my blog on the Internet and contacted me to ask if I would like to write about her book, with her permission.  I suspected this was a very important book and am convinced of that now that it is published and I’ve had a chance to thoroughly read it.  So I agreed to help her bring her book to the attention of my readers.  We have become better acquainted though emails and the sharing of information and articles over the Internet spanning from the US to Europe, where Ms. Stark currently resides.  She continues to be committed to trying to help right the terrible wrongs committed against individuals and groups of citizens with the use of these financial manipulation instruments, Hidden Treuhands. 

If you are paying any attention to the news, you will be able to make connections between what is being reported, in some cases only surface coverage reporting, and what Ms. Stark is trying to raise an alarm about.  We are all affected by this kind of fraud and greed.  It is not going to be easy to get it addressed.  Even those in our government in charge of oversight are lackluster in their motivation to learn about and go after this kind of crime, even though there are a couple of notable instances in the news now. 

I would like to see this change.  I would imagine many of you would also.  That is why it is important that everyone read this book.  What we don’t know will certainly have the ability to hurt us in this arena.  Thank you for paying attention.  GFS

Hidden Treuhand may be purchased at Amazon.Com and Barnes and Noble.  You may also find it on the shelves of your public library. 

Get It Yet?  Americans Being Taken to the Cleaners by Big Corporations and Banks, and It’s Legal…. In Europe!

 

It just keeps getting worse.  Any day, check the articles popping in mainstream media as well as the Internet about financial intrigue and crime.  Missing money, (bailout or not), missing estates, missing retirement accounts, you name it, it’s been happening.  As the operations of the ruthless and greedy, (in this wild-west economic time we are in),  break out of the shadows, we all wonder, how could this have happened? After all, we have laws to protect people in the U.S. don’t we? 

Below is the introductory article written by author, Shelley A. Stark, about an secret banking institution called Hidden Treuhand, and a recent follow up article regarding the same.

   Since the preliminary article in August of 2008, Ms. Stark’s book has been published and is now available.  Copies have been going fast.  Last night Amazon had only three left.  If you delay, you’ll have to wait for the next printing.

 This book will open your eyes to the drama that has been going on out of sight and frankly for most American’s below our radar.  Ignorance is NOT bliss!  It is a must read for everyone, but in particular federal oversight employees, ALL federal oversight employees.  -GFS

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Halliburton’s Hidden Treuhand

Monday 11 August 2008

by: Shelley Stark, t r u t h o u t | Report
Vanity Fair reported shipments of over $12 billion in cash to Iraq. $9 billion of the cash is gone and unaccounted for. (Photo: The Village Voice)

Halliburton takes advantage of a European loophole that lets corporations hide beneficiaries and assets.

    Little is known of a customary European legal practice that offers corporations and individuals an opportunity to profit from assets while maintaining complete anonymity of the beneficiary’s identity. This practice is referred to as “Hidden Treuhand” in the English language. The practice of Hidden Treuhand submits to legal local customs in Austria, Germany, Liechtenstein, Luxemburg and Switzerland, but due to globalization, has moved beyond European borders via corporations and individuals, who put it to personal use.

    The practice of Hidden Treuhand is relevant and unregulated. More and more, the relevant practice of Treuhand is used in hiding an asset owner’s identity from the outside world. Assets, whether they are corporate shares or fixed assets, can be owned in secret. The personal income derived from these assets can also be kept secret from tax authorities. An example of how Hidden Treuhand facilitates tax evasion is part of the latest scandal where thousands of Germans evaded tax through the services of the LGT Treuhand Bank in Liechtenstein, using a combination of Treuhand and foundations to hide true owner identity of bank accounts.

    Hidden Treuhands in Europe impact the lives of American citizens. Hidden Treuhands enable even American corporations to hide the identity of beneficiaries, assets and income. Halliburton has a Hidden Treuhand embedded in its Austrian subsidiary. It prevents transparency regarding corporate activities.

    The lack of transparency creates special advantages for some, and consequences for others such as governments, competitors, stockholders and citizens. For example, a beneficiary can evade personal income tax, because the income derived from a hidden asset is not linked to the beneficiary. There is another advantage to Hidden Treuhands that borrows from the concept of a “trust.” The “trust” concept allows for dividends to be removed. Money transferred to a subsidiary may be considered a dividend. By using a network of subsidiaries, favorable tax laws and banking secrecy, CEOs and insiders can profit without transparency. The Hidden Treuhand is an important aspect of what makes globalization so attractive to American and European corporations.

    Given these attributes, it is alarming when a Hidden Treuhand is discovered in a subsidiary that is fully owned by Halliburton USA. Halliburton’s Hidden Treuhand is evident in the firm’s corporate records. Halliburton International GmbH was created in Austria in June of 1992, although another subsidiary, at the same address, was in existence in Austria since 1958. The new subsidiary, Halliburton International GmbH, has no apparent reasons for existing other than to house a Hidden Treuhand in its corporate structure, receive dividends from other subsidiaries and acquire other subsidiaries. This firm has no employees. It creates no income. Another company, Halliburton Company Austria GmbH, at the same address, could have equally performed whatever function this subsidiary has, but it has no Hidden Treuhand. The obvious conclusion is Halliburton USA needed a subsidiary with a Hidden Treuhand.

    The Hidden Treuhand easily accomplishes tax evasion because dividends transferred to a subsidiary with a Hidden Treuhand can be anonymously distributed or used to purchase other holdings. For example, Halliburton International GmbH has acquired acquisitions in Russia and Kazakhstan that later disappear from the corporate records.

    Halliburton attracts a certain limelight in connection with any Treuhand activities because of its link to a highly controversial war and Vice President Dick Cheney’s earlier association with Halliburton. We would have expected all ties to his former employer to be have been severed when he took office to avoid a conflict of interest. The impenetrability of the Hidden Treuhand makes it impossible to know who else is involved beyond the CEOs listed on Halliburton International GmbH historic corporate data.

    Dick Cheney claims to no longer own stock in Halliburton, but he was its chairman and CEO for five years, and either hired or promoted many of the executives now running Halliburton, or formerly involved with the subsidiary with the Hidden Treuhand in Austria. It is highly unlikely the chief executive officer, Dick Cheney, would be unaware of the Austrian subsidiary’s existence, originally headed by the executive vice president and chief legal officer, Lester L. Coleman, of Halliburton International USA. But it is an absolute certainty Lester L. Coleman and all the other CEOs listed on Halliburton International GmbH corporate historic records do know of the subsidiaries existence and its Hidden Treuhand. It was the intention of these CEOs to set up a secret subsidiary in 1992 with a Hidden Treuhand embedded.

    Perhaps more importantly, Halliburton’s CEOs, listed in the corporate historic records of Halliburton International GmbH in Austria, should know Hidden Treuhands could be used to undermine American security by providing a means for financing terrorists. Currently, one of the strongest arguments the US and the OECD are using against banks, lawyers and Treuhand activities in Europe to combat tax evasion and money laundering is how these activities can be used to fund terrorism. The Iraq War is one portion of the overall strategy of the ‘War on Terror’ that also includes preventing any funding for terrorism. It takes little imagination to see the huge potential Treuhands facilitate: creating a means for terrorists and criminal organizations to conceal their true identities and motives and yet work openly in the capitalist system.

    Halliburton’s CEOs must be aware of the potential misuse of Hidden Treuhands, as they have not been particularly open about their own use of Hidden Treuhands to date. Halliburton simultaneously contracts to fight a “war on terror,” while utilizing the same nontransparent mechanisms concerned authorities seek to prevent access to by terrorists. Faced with a conflict of interest, Halliburton CEOs demonstrate with their silence a willingness to protect their own interests, and doing so while we are at war with an enemy that works in the shadows.

    The noncompetitive contract awarded Halliburton was orchestrated by Vice President Dick Cheney and backed by the Bush administration. This contract has afforded an estimated US$1.4 trillion to US$3 trillion of US taxpayer money to flow through the coffers of Halliburton, virtually unmonitored and fraught with accounting irregularities. The receiver of much of this US taxpayer money is Halliburton USA, its affiliates and subsidiaries. One of the subsidiaries, the Austrian subsidiary, is capable of dispersing any money sent to it to unknown persons, without a hint of transparency.

    The Hidden Treuhand is more than just a means of profiting without transparency; it is a national security threat, whether wielded by al-Qaeda or Halliburton. If Americans were brought into a war based on a profit motive while we were supposed to be focused on alleviating the threat of terrorism, it could amount to treason. This risk should be given some credence and investigated. For this reason, Halliburton’s corporate records were given to the US Internal Revenue Service. Maybe they will find something illegal, tax evasion for example, or maybe they will come back and say they found nothing illegal: The Hidden Treuhand is just a little bit naughty.

    There is no transparency to a Hidden Treuhand, and, therefore, no means to identify the real benefactors. But the most important factor concerning a Treuhand contract is this: If a Treuhand contract is embedded in the corporate structure, then its sole purpose is to prevent the public from knowing the identity of the real stockholders. Who is calling the shots and who is benefiting is kept secret.

    The “True Hands,” the true benefactors’ identity, is hidden from public knowledge; they remain anonymous and nameless in transactions, and that is the sole incentive for creating a Hidden Treuhand.

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    Shelley Stark is the author of  “The Hidden Treuhand: How Corporations and Individuals Hide Assets and Money,” now available at Barnes and Noble and Amazon.com.

 

 

In the Age of Stealth Wealth – Bank Secrecy is Alive and Well!

Written by Shelley Stark author of: Hidden Treuhand: How Corporations and Individuals Hide Assets and Money 

Bank Secrecy Bites the Dust in Europe”- Newsweek. “Switzerland, Luxembourg, Austria Loosen Secrecy Rules” – Bloomberg. “Tax Havens Give in to EU Pressure” – Spiegel ONLINE.

Has banking secrecy finally come to an end? This is what newspapers are unanimously saying. Is it true or should these headlines be punctuated with a question mark? Well, once again Switzerland, Austria, Luxembourg, Liechtenstein, and Belgium too are in the spotlight for their bank secrecy rules. There have been strong words emanating from the international community in the past and they produced little, or we would not be entertaining headlines such as these today. 

Changes to bank secrecy have come along way since the day of the anonymous savings book (‘Sparbuch’ in the German language). On January 1st 1994 some provisions concerning banking secrecy were partly amended in response to concerns of money laundering, but these provisions were largely undertaken on a voluntary basis by each bank. Up until this time, one could simply show up at the bank with $10 or $10 million dollars, and put it in anonymous savings account.  It was anonymous because you didn’t have to show any identification. The bank account was identified by a secret password, which the owner of the account assigned to the savings book and was subsequently registered in the bank. To get the money, you would have to show up at the bank with the savings book and give the secret password. This means in reality, to make a pay-off as seen in spy-thrillers, nobody needed to run around with suitcases of money. One could simply make a pay-off by handing over the savings book with the password and the recipient could visit his money at leisure. The new account holder could change the password to afford more security, but as longs as he had the savings book and the password, the money was safe and the old owner could not obtain these funds. Of course, this also meant if the savings book was lost or the password forgotten, then no one could access the money. The password account is much like its Swiss cousin the numbered account. The concept of the number and the password account originated when Hitler sought to stem the flow of money seeking a safe haven in Switzerland and in Austria. The capital exodus began due to inflation, but later due to Nazi persecution of Jewish citizens, it was feared that Hitler would try to force the Swiss to reveal Jewish accounts. By giving out numbers, the Swiss bank could claim not to know whom the account belonged to. In Austria, the practice became passwords. 

In 1995, Austria became a member of the European Union. Many of the earlier voluntary duties became law so that by November 1st 2000 the ability to open anonymous accounts was finally ended and no payments or withdrawals could be made to existing accounts unless the bank identified the identity of the savings account holder and money laundering was finally rendered a criminal offence. Tax evasion on the other hand, the concealing of income and not falsifying any documents, is merely a civil offense, not unlike a traffic violation. In addition, as of January 1st 2000 any cash transaction over €15,000 with a customer that didn’t have an ongoing relationship with the bank or was wired to the bank from offshore, needed to register their identity with the bank. These changes were brought about as the result of a European Council Directive to prevent the financial system from being used to launder money.  As a result of these amendments to the banking law, the European Commission withdrew its complaints against the Republic of Austria.                                           

The story regarding Switzerland and Liechtenstein is slightly rockier. German federal investigators paid €5 million to a former bank employee of the Liechtenstein Große Treuhand bank (LGT). The employee, Heinrich Kieber, is alleged to have removed the secret bank data from the LGT bank, thus kicking off a row over tax evasion in the EU. Before the dust settled, U.S. investigators charged Switzerland’s UBS bank for deliberately encouraging American citizens to engage in tax fraud activities. The Swiss have always attracted a certain limelight regarding chocolate, cheese, cuckoo clocks, and banking secrecy – a financial business model that attracts an estimated $1.84 trillion in assets of which about €450 billion belong to private customers. In Switzerland, the hoopla began when the bank was found to have offered tax evasion tactics to Americans that were invented by auditors at KPMG, who only managed to avoid criminal prosecution when they paid up $456 million in fines and penalties. The UBS bank was ordered to pay $780 million, and then they did the unthinkable, they handed over the names of 300 customers after the U.S. government produced strong evidence of tax evasion. The U.S. authorities are still seeking the names of an estimated 52,000 Americans with secretive UBS accounts.

According to mainstream press, these events are what have sparked the U.S., British, and German push for an ‘end’ of banking secrecy and prompted bankers from Switzerland, Austria, Luxembourg, and Liechtenstein to hoist their skirts and run for cover. Baa-humbug!

Firstly, tax evasion is not a criminal offense in any of these countries currently being hounded for their bank secrecy laws and for the most part bank secrecy is federal and constitutional law in these countries.

Basically the international community has pushed these European tax havens to accept Article 26 of the OECD Model Tax Convention on Income and Capital. Article 26 creates an obligation to exchange information, but the contracting state is not at liberty to engage on a “fishing expedition”. The contracting country must firstly show evidence of tax evasion, can only request information that is relevant to the tax affairs of a given taxpayer, must demonstrate the foreseeable relevance of the requested information, and prove to have pursued all domestic means to access such information. As of yet, it is unclear just how much tax evasion evidence even need be presented.

Austria, Belgium, Luxembourg, and Switzerland were opposed to the current version of Article 26, last updated on July 17, 2008, but since March 2009 each of these countries has notified the OECD that they are withdrawing their reservation to Article 26. They now believe that bank secrecy is not incompatible with the requirements of Article 26. And with little wonder, because the particulars of Article 26 are easily circumvented with a legal phenomenon called ‘Hidden Treuhand’.

Hidden Treuhand is a customary practice in Austria, Switzerland, Luxembourg, Liechtenstein, and even Germany. Due to globalization, it has transcended its national borders to impact industry, commerce, and banking worldwide. It is key to creating shell companies, foundations, and bank accounts where the real owner identity is hidden and cannot be exposed by any legal means. A Hidden Treuhand creates conditions where a lawyer conducts the duties required of him on behalf and in the interest of the client, but all business actions appear to be in the name of the lawyer. The real beneficial owner remains unknown. This construct can be liberally applied to stock in corporations, foundations, real estate, patent and copyrights, financial instruments such as derivatives and bonds, and of course, cash.

In 2000, some aspects of banking secrecy came to an end, but the Hidden Treuhand is frequently used to close the gap that those transparency laws were supposed to fill. In essence, the Hidden Treuhand is somewhat like a hidden trust, but legally it and the environment in which it functions, can achieve far more than is presently realized. Hidden Treuhand hides the beneficial owner of any asset and that includes bank accounts. Hidden Treuhand, when combined with banking secrecy, hides profits beyond the reach of tax investigations and governments. It’s like missile shield for money – nothing gets past this protective barrier.

Article 26 of the OECD MODEL TAX CONVENTION ON INCOME AND CAPITAL concerns the exchange of information between Contracting States. Hidden Treuhand is the creation of customary practice, but it is not regulated and there are no laws in existence that could be equated as regulatory. The following Hidden Treuhand provisions are quoted from law books referring to customary practice and illustrate how each of the OECD provisions is rendered mute. Compare the inherent capabilities of Hidden Treuhand with text of Article 26 where it states that none of the following provisions shall be construed so as to impose the obligation to:

OECD: to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

Hidden Treuhand: “What makes a Treuhand contract so special and unique under Austrian Law is that there is no special law regulating Treuhand contracts…there is no regulation of Treuhand contracts under Austrian Civil Law, and there are not any laws that could be equated as regulatory.” 

OECD: to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

Hidden Treuhand: “It is not to be expressed that any direct legal relationship or connection exists between the businessmen and the lawyer. In fact, the lawyer would be guilty of misconduct should the lawyer reveal that a legal relationship (power of attorney) exists between himself and the client”.  

OECD: to supply information which would disclose any trade, business, industrial commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public).

Hidden Treuhand: “When using a Hidden Treuhand, trustees are referred to as a Straw Man. A trustee functions like a Straw Man and acts in the name of the client who remains undeclared in the background. The relationship between the businessman and the lawyer is secret, which often includes even knowledge of a ‘power of attorney’ existing between the lawyer and the businessman”

When it comes to Hidden Treuhand, lawyers exploit attorney client privilege and claim it their legal duty to deny information and to keep all matters pertaining to their client confidential. No one, no court or authority, no government, can force an attorney to reveal any secrets concerning his client. And what of banking or bank accounts?  

The EU and international money laundering laws have striven to eliminate any criminal elements from the banking system, but Hidden Treuhand works within the law and in the banking system. Hidden Treuhand bank accounts are not made public because only the trustee is entitled to use the account, and there is no legal relationship between the client and the bank account. A lawyer lets the bank know that an account is a trust account, but does not have to disclose the name of the beneficiary. A Treuhand account means a banking relationship exists between the bank and the trustee and the bank is not entitled to know whom the lawyer represents anymore than anyone else.

“According to leading banks, designating an account as a Treuhand account alters nothing. The true account beneficiary remains a secret because only the trustee is authorized to use the account and there is no legal relationship between the client and the ‘special account’. The clients’ identity is not exposed when making bank transactions because it is the trustee’s responsibility to make money transfers from this ‘special lawyer trust account’ (Anderkonto)”.

As result of the crackdown against tax havens, more clients will have to resort to Hidden Treuhand and lawyers services. Already Liechtenstein has sold its Treuhand services to a separate company, quite possible even to itself via Hidden Treuhand. Their business model will no doubt resemble the Austrian one where the registration of foundations and Hidden Treuhand is separate from bank institutions. If foreign tax authorities manage the first hurdle and can provide strong evidence of tax evasion and seek further information regarding bank accounts they will firstly have to petition the cooperation of the Ministry of Finance. The ministry will ask the banks, but to what end? The bank cannot tell them what they do not know.  

So much for the grandiose announcement heralding the end of bank secrecy and tax havens!

Many large-cap US corporations have headquarters or subsidiaries based in tax havens. For example: McDonalds recently moved to Switzerland. Moreover, it is possible for a hedge fund to own an offshore bank. For example: the highly secretive hedge fund Cerberus owns Bawag, an Austrian bank, as well as a majority shareholder stake in Chrysler and GMAC. If questioned, would Bawag reveal information regarding any accounts held by a stakeholder of Cerberus?

Just how big is the offshore banking industry? The OECD estimates that assets held by the offshore banking industry might be as high as $11.5 trillion. Little wonder U.S. banks are having trouble lending money and no big surprise the European legal community claims to have no objection to Article 26.

Bank secrecy is alive and well! No question mark necessary. It just got a bit more expensive and devious. It is high time someone made the announcement: we have officially entered the ‘Age of Stealth Wealth’!

To learn more about Hidden Treuhand and what role it is playing in the financial crisis, bank secrecy, bailouts, globalization, the privatization of Iraq, and your financial security, please read: Hidden Treuhand: How Corporations and Individuals Hide Assets and Money

Available direct from publisher and Amazon and Barnes and Noble

 

US Banking Crisis Far From Over, Congress Warns

Link:  http://www.truthout.org/081109U?n

Tuesday 11 August 2009

by: Andrew Clark  |  Visit article original @ The Guardian UK
A Congressional panel has warned that if unemployment remains high, banks will incur further losses on bad assets. (Photo: Agence France-Presse)

Congressional panel warns that if unemployment remains high and the property market continues to crumble, banks will still incur further losses on bad assets.

    Toxic assets on the balance sheets of hundreds of American banks remain a “substantial danger” to the financial system and could yet drive institutions to collapse, a congressional watchdog warned on Tuesday in a report urging against any complacency that the banking crisis may be drawing to a close.

    A congressional oversight panel charged with scrutinising the Treasury’s $700 billion (£423 billion) bailout efforts said smaller banks, which were not examined in recent government “stress tests”, are at particular risk as the ongoing US recession pushes an increasing number of commercial property loans into default.

    The panel warned that if unemployment remains high and the property market continues to crumble, banks will still incur further losses on bad assets: “The financial system will remain vulnerable to the crisis conditions that Tarp [the Treasury’s bail-out program] was meant to fix.”

    Elizabeth Warren, the panel’s chairman, said the underlying value of assets on banks’ balance sheets remained uncertain, with many loans proving almost impossible to sell.

    “No one has a good handle how much is out there,” said Warren. She cited estimates that toxic assets amount to between $600 billion and $1.5 trillion, observing, “that’s a lot.”

    Since the banking crisis blew up in September, the US government has pumped capital into leading institutions and has heightened scrutiny of banks’ capital ratios. But a public-private partnership to pluck troubled assets from banks’ balance sheets, which was a centrepiece of treasury secretary Timothy Geithner’s strategy, has failed to generate much momentum.

    “The problem of troubled assets is especially serious for the balance sheets of small banks,” said the panel, which pointed out that these institutions generally held entire toxic loans, rather than sliced and diced mortgage-backed securities which have been the target of most Treasury clean-up efforts.

    Frozen Assets

    Meanwhile, Citigroup got an unwelcome reminder of the legacy of its activity at the height of the financial boom as it was sued by seven tiny Norwegian towns which lost millions on investments in risky derivatives.

    The towns all have fewer than 33,000 residents and have filed a joint lawsuit with Terra Securities, a bankrupt Norwegian broker, claiming damages of $200 million from Citigroup.

    “Citigroup’s marketing materials contained misleading statistics that concealed from both Terra and the municipalities the significant risks inherent in the fund-linked notes,” said Jon Skjorshammer, a lawyer representing the plaintiffs.

    The towns include Narvik, a community north of the Arctic Circle with fewer than 20,000 residents which has had to borrow money to pay public employees, and Hattfjelldal, which has barely 1,500 residents but which reportedly invested 103 million Norwegian kroner (£10m). They were sold leveraged investments in US municipal bonds marketed through Terra Securities by Citigroup.

    Citigroup said: “We believe this suit is without merit.”