Wednesday, July 11, 2012

It's not actually about the Swiss bank account

You know the old joke, where the older man says to the younger one: "Is it for the likes of you that I lost my leg in the war?!?"

Younger man: "But, James, you have both your legs."

Older man: "I was speaking metaphorically, you fool!"

So it is, in a sense, with Romney's recently closed Swiss bank account.

Yesterday I was talking to a reporter about an upcoming story on Romney's tax and financial dealings, and I said about the Swiss bank account: That's probably not the issue at all.  But what it is, is a metaphor for the things that actually are disturbing about Romney's highly secretive tax and financial dealings.

Swiss bank accounts have a bad reputation due to history, as well as Hollywood movies.  If I recall rightly, in the Bourne movies our hero has a secret bank account there.  OK, he's the good guy, but lots of people have historically used Swiss bank accounts over the decades to maintain extreme secrecy - sometimes, from tyrannical home country regimes or potential kidnappers or even spouses, but often because they were trying to conceal ill-gotten gains (e.g., tax fraudsters from countries such as the U.S., or looting dictators from other parts of the world).

Then of course there's the notoriety that Swiss bankers rightly earned for their dealings with high-ranking Nazis during and perhaps after World War II.  However irrelevant today, this still helps empower the Swiss bank account as metaphor for other fishy things happening.

But all this has presumably has nothing to do with what makes so many people (including me) uneasy about Romney's financial dealings, as well as his personal and business ethics, such as they are.  Now, I am starting to think that no wrongdoing on his part should be entirely ruled out, before there is evidence against it (which he is unwilling to provide), simply on the ground that "he's too smart to do something as crude and stupid as that."  Again, Nixon, though no dummy, evidently wasn't too smart to do Watergate.  And Romney appears to be so super-aggressive, so complacent about it, and so fundamentally tone-deaf, that he may well have done lots of things that we would have thought he was too smart to do.  But still, I'd bet against the outright fraud and evasion that Swiss bank accounts at one time might have helped effectuate - and actually don't any more, in the aftermath of UBS and all that.

I'd say, if the veil ever lifts, reporters should look at all the Caymans stuff, and the $20M to $100M IRA, and the tax planning - was it clearly legally correct?  Or was it super-aggressive, and nearing or even crossing lines?  Ten to twelve years ago, for example, was he investing in outrageous tax shelter scams (such as Son-of-BOSS)?  As distinct from focusing on the Swiss bank account.

In sum, when people say "Ooh, he had a Swiss bank account," while they may be deriving the right conclusion, they are deducing it from the wrong piece of evidence.  But there really is a "Swiss bank account problem" - so long as we keep in mind that I am "speaking metaphorically, you fool."

UPDATE: A la the "Taxing Matter" blog, there are a few interesting questions about Romney's Swiss bank account that I didn't mention.  Why did he have money there at a low rate of return, when the rationales offered are unpersuasive?  Did he report and pay tax contemporaneously, or did he come in afterwards via the voluntary settlement initiative?  Does UBS have anything to do with why he closed down the account?

So perhaps not entirely 100 percent just a metaphor.


Anonymous said...

Romney's spokesman says that Romney "hasn't paid a penny less in taxes by virtue of where these funds are domiciled. His liability is exactly the same as if he held the fund investments directly in the U.S."

If that's true, which I doubt for the IRA, then what other purpose would Romney have for holding his investments overseas? I'm stumped in trying to figure it out.

Daniel Shaviro said...

I am skeptical that the spokesman's comment is entirely true, in particular for the IRA borrowing point that you note. But it may be the case that all of Romney's non-tax-exempt overseas holdings are in PFICs, and thus that he is paying current U.S. tax on his investment portfolio, which would make the statement true to a degree.

In terms of the other motivations, I am a bit stumped as well. Diversification is good, but that's why not people put money, say, in the Caymans.

Anonymous said...

Perhaps it was for asset protection purposes. Someone who spent years involved in aggressive business dealings might fear shareholder lawsuits. If that fear was a reason for the overseas investments, then it's understandable that it's not something a presidential candidate would want to admit.

shanlon said...

Also, speaking of Son of BOSS:

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