There is a lot of capital hidden away in tax havens and deposited in offshore banks. Where did this capital come from and who are the account holders? Are they really morally upright citizens, concerned for the welfare of their homelands, or have they exploited every possible legal loophole to escape weak regulatory systems and then to stash away their barely legal (sometimes illegal) monetary gains? Fortunately there are still some brave citizens with a conscience left who are not afraid to speak out. For example, we have to be thankful to Robert M. Morgenthau, District Attorney of New York, who wrote in a letter to the New York Times on 4 March 2008 (‘Havens for Tax Evasion’ published by the New York Times on 11 March 2008):
“Bank deposits in the Caymans have increased by $500 billion in the last 18 months and now amount to four times the total deposits in all the banks in New York City.
The Caymans, notorious for their bank secrecy laws and lack of supervision over financial markets, have figured in many major financial scandals. For example, they were the nominal home of Long Term Capital, the giant hedge fund that collapsed in 1998. Enron Corporation used 441 Cayman affiliates to hide $2.9 billion in losses. Parmalat Finanziaria used Cayman subsidiaries to falsely claim $4.9 billion in bank deposits that it did not have.
Last year, two Bear Stearns hedge funds that were incorporated in the Caymans collapsed, following the devaluation of its subprime mortgage-backed investments — the implosion cost investors $1.6 billion in losses.
The economically developed countries need to impose severe sanctions on the tax havens and those who use them to unfair advantage. As recent history confirms, totally unsupervised markets will eventually have serious problems, with ripple effects for markets worldwide.
And offshore tax evasion alone costs the United States government more than $70 billion annually. Left unchecked, these rogue jurisdictions have the potential to do a great deal of harm to the world’s truly productive economies.”
Morgenthau’s letter was published here: http://www.nytimes.com/2008/03/11/opinion/lweb11morgenthau.html
I like to invite the readers of this blog to become active wherever they are, by sharing similar information online. This will help to expose a shadow banking system that can bankrupt whole societies for the benefit of a few extremely greedy individuals.
Filed under: Finance