Mad, bad or just plain stupid?

August 27th, 2009

The Wall Street Journal has run an Op Ed by Holman W. Jenkins, Jr., a member of its editorial board. Published under the title “Does the World Still Need the Swiss? : UBS’s sin was marketing secrecy too broadly.” I am struggling to work out whether it is mad, bad or just plain stupid.

The hypothesis is this: that in the World War 2, more by luck than judgement the bank secrecy that the Swiss created to assist tax evaders in France helped the Jews. Of course, it also helped the Nazis: the Swiss were entirely amoral on the issue. Jenkins doesn’t see it like that though. he says:

That’s the paradoxical virtue of Swiss banking secrecy, which has protected both greedy tax scofflaws and those merely trying to save something for the next generation when politicians are burning down the economy back home.

This he calls the Swiss contribution to global culture and he mourns the fact that “Swiss secrecy in the future may be a privilege only for those with nothing to hide.”

Why does he say that? He says:

In 1934 … the Swiss looked out and saw a world gone mad: bank failures, depression, militarism, fascism, communism. The new law was meant to buttress the world’s confidence in the privacy and security of a Swiss bank account.

He goes on:

Today, the world is at least slightly deranged, with the possibility of getting very much worse. Democrats in Congress, in the face of every economic lesson, want to push marginal tax rates back up to confiscatory levels. AIG employees have been threatened with political lynching unless they “voluntarily” surrender income they were legally entitled to. Congressman Henry Waxman now wants to collect salary data on CEOs who don’t support ObamaCare.

On the macro level, meanwhile, the Swiss have always done a good business when residents of other countries see their governments making more commitments than they can possibly afford—exactly the situation in Washington today, as all the antecedents of an inflationary blowout are in place with only Obama man Ben Bernanke standing in the way.

That is the mad bit. Does Jenkins really think supplying universal healthcare is the same as escaping the Nazis? Or that having to bail out banks justifies tax evasion through those self same banks? Is such comment really being published in the WSJ?

And is he really saying people should tax evade to bring down the elected government? If it is, that’s the bad bit. Bad in the sense of being fundamentally undemocratic.

What’s the stupid bit? Continuing to endorse Swiss banking secrecy is that part. Jenkins says:

No wonder UBS chief Oswald Grubel, even as he cleans up after his bank’s reckless marketing (under prior management) of tax evasion to American citizens, still sees a bright future. Wealthy investors, he says, are on the hunt for havens of political and economic stability. On that score, he told the Journal, “Switzerland looks a lot better than the U.S., the U.K. or any other country.”

But as he notes, that can only be true if the Swiss stay beyond the reach of US law:

The Swiss bank to trust in the future will be one whose assets and personnel are safely tucked behind Swiss mountains and a Swiss government adept at playing on the self-interest of other nations. UBS’s sin was trying to market Swiss secrecy cheaply and widely—too cheaply and widely for others to tolerate. Let’s hope we never need them again as we have in the past. But just in case, let’s also hope the Swiss have learned to manage the franchise better.

Think about that for a moment and what he’s saying is that bank secrecy should survive beyond the reach of international law to protect a privileged few with enormous wealth and a complete disregard for the democratic process from the requirements of of US law that they pay their tax on their world wide income to support the state in which they live and in which they, no doubt, earn their incomes.

Blatantly this is the Wall Street Journal promoting the merits of tax evasion and the role of tax havens in undermining the democratic rule of law. And note, this is not an op-ed from an outsider: this is in-house WSJ material. This is the paper’s view.

Think about it US readers. And wonder whether this man can be prosecuted for inciting wire fraud. Because what he’s doing is seeking to undermine your state.

Maybe it’s not just mad, bad and stupid. Maybe it’s all of them and treason. In which case, what to do about it?

Written by Richard Murphy

Follow @FinTrCo