According to an analysis by Pulitzer-Prize winning reporter David Cay Johnston, formerly of the New York Times, the Bush tax cuts, touted as a harbinger of prosperity by the Republican Party, actually robbed each American taxpayer of $48,000 in pre-tax personal income during the twelve years of their existence, for a total of approximately 6.6 trillion dollars.
This is more than enough to pay for every student loan, car loan, and credit card debt in the U.S, while still leaving 2.4 trillion dollars in the pockets of Americans. It is the equivalent of an extra 11 dollars a day lost to each American taxpayer over the last twelve years.
Johnston analyzed rates of long term average personal incomes as reported by American taxpayers from 2000-2012, adjusting for inflation and population growth. His tables are contained in this article:In 10 of the 12 years when the Bush tax cuts were in effect, the average income shown on tax returns was lower than in 2000. In the two upside years, average income rose modestly, up $504 for 2006 and $1,744 for 2007.
Total those 12 years and the net shortfall per taxpayer comes to $48,010.He notes that after twelve years of tax cut mania average real hourly wages are now 6% less than they were in 1972-1973.
Less than they were forty years ago. Where did the money go?The damage wrought to American incomes was bad enough, but the Bush tax cuts left an even more damaging legacy. While the prosperity of the previous decade was simply wiped out by these cuts, and with it the means and will to sustain prosperity through government investment and infrastructure improvements, the tax cut mentality inspired more of the same down at the state levels, multiplying the effects:Of the total national increase in income in 2012 over 2009, an astonishing one-third went to just 16,000 households, and almost 95 cents of each dollar went to the top 1 percent, while the bottom 90 percent lost ground.Needless to say, this was not what we were told in 1999 by candidate George W. Bush. On the contrary, the future “Terror President” promised:Speaking to MSNBC host Chris Hayes on Wednesday, Johnston recalled that President George W. Bush had promised during his 2000 campaign that his tax cuts would lead to greater prosperity.
And the investigative reporter pointed out that tax cuts not only damaged personal wealth, but they also took a toll on government services, as a mindless tax cutting frenzy became the dominant philosophy at the local and state levels, leading to budgetary freefalls like we’re witnessing today in states like Kansas:
“What we’re seeing in America today is our country is falling apart, we are not maintaining it, we are not doing the things we need to do to continue to have our government,” Johnston explained. “And the answer that we’re provided with by people like [Republican Kansas Gov.] Sam Brownback: ‘We need more tax cuts.’ You know, what are we going to do? Bleed ourselves to death?”“[A] tax cut designed to sustain our nation’s prosperity — and reflect our nation’s decency … The entrepreneurs of America create jobs, take risks and make their profits with honor. My tax cut plan will expand their ranks by encouraging American enterprise … Low tax rates are a powerful economic tool to promote a higher standard of living for all Americans.”
We are living now with the end result of the Republican “experiments,” the “profits made with honor” by the “entrepreneurs”: chronic unemployment and underemployment, gross income inequality, people in their 30’s unable to buy homes due to unprecedented student loan debt (debt often incurred to escape from the dismal jobs market for young people), and a Republican-dominated House that balks at raising the paltry minimum wage, but, as demonstrated today, is perfectly content with inflicting on all of us another 263 Billion in tax cuts for businesses.Think about what you could have done with that extra $48,000 every time you hear the word “Bush.”Advocates of so-called trickle-down economics have grounded their thinking in the idea that the entire pool of US wage earners benefits financially when the rich get increased tax cuts. According to Johnston, however, this is disproven by actual IRS statistics. Quite the opposite has happened to US workers; more than $6.5 trillion has gone missing from the incomes of those who are not wealthy. Meanwhile, the rich are getting richer because of enormous tax cuts and a record-breaking stock market.
More reason why the Bush Tax Cuts were bad for America, along with the rest of Dumbya Bush 43’s reign as President.
h/t: Dartagnan at Daily Kos
In which logic flips itself on its head and introduces new wrinkles.
Grover Norquist = idiot to the core.
It took until after 2 a.m. on the morning of January 1, 2013 — a few hours after the Bush tax cuts had technically expired — but the Senate passed legislation that will reinstate tax cuts for middle-class taxpayers, and lock in a variety of higher rates on income above $450,000.
The final vote was 89-8.
Opposing the legislation were Democratic Sens. Tom Carper (D-DE), Tom Harkin (D-IA), and Michael Bennet (D-CO) along with Republican Sens. Mike Lee (R-UT), Richard Shelby (D-AL), Rand Paul (R-KY), Chuck Grassley (R-IA), and Marco Rubio (R-FL).
By passing the legislation with overwhelming support from members of both parties, the Senate has handed House Speaker John Boehner (R-OH) responsibility for following suit, and averting the vast majority of the austerity measures in the so-called fiscal cliff.
For that reason, and because House Minority Leader Nancy Pelosi has held her cards close to her vest, House passage remains unclear. It may require Boehner to break the so-called Hastert Rule, that legislation does not come to the floor without the support of more than half of the majority party.
But it’s not all upside for Democrats, substantively or strategically. The bill approved by the Senate does not resolve the so-called sequester: deep spending cuts to everything from defense to the social safety net. Instead, it delays the sequester for two months.
Many in the party are particularly concerned that the fiscal cliff bill deals Democrats a losing hand, setting up an enormous March fight over federal spending, when government funding bills will have to pass, the sequester kicks in, and the debt limit has to be increased.
The White House and congressional lawmakers have reached a deal to avoid the “fiscal cliff” that would delay harsh spending cuts by two months, an Obama administration source said.
Democratic Senate Majority Leader Harry Reid and House of Representatives Minority Leader Nancy Pelosi have also reportedly signed off on the agreement, which would extend Bush-era tax cuts for family incomes below $450,000.
Yet the US was still technically on track to fall over the “fiscal cliff” at midnight on Monday.
Lawmakers were working feverishly into the night to hammer out a deal that would raise tax rates on the wealthy but preserve tax breaks for the middle class and maintain some key stimulus benefits like unemployment insurance.
The Senate plan was reportedly heavy on tax increases and light on spending cuts, which had raised concerns that it would repel rank-and-file lawmakers in the Republican-controlled House.
Under the Senate plan, those with a household income above $450,000 or individual income above $400,000 would be taxed at 39.6 percent, up from 35 percent.
Republicans, who control the House of Representatives, have been against raising taxes on the rich, while the Democrat-controlled Senate and the White House have been averse to spending cuts.
Meanwhile, the country’s chronic deficit spending - about $1tn a year - continues without a deal to address it.
Without a deal, the nation could lose up to 3.4 million jobs, the Congressional Budget Office has predicted. And budget cuts of up to 9 percent could hit most of the federal government.
And if the limit were not raised on how much the government can borrow, reaching the $16.4tn debt ceiling could lead to a first-ever default in February or March that would shake worldwide confidence in the United States.
On top of that, the current Congress is in session only through mid-day on January 3. After that, a freshly elected Congress with 13 new senators and 82 new House members will inherit the problem.
h/t: AJ English
Republicans reacted immediately and with tremendous hostility to President Obama’s remarks at the White House Monday afternoon, and accused him of jeopardizing a deal to avoid the fiscal cliff.
Senate Minority Leader Mitch McConnell and Vice President Joe Biden had been nearing agreement on legislation to avert broad tax increases and spending cuts next year, say aides with direct knowledge of the negotiations.
But the evolving framework is unsatisfactory to members of both parties, including members of Democratic leadership, and one Democratic aide described the whole process was “hanging by a thread.”
That was before Obama’s remarks, in which he boasted that the nascent plan would protect major progressive priorities, and attacked Congress for threatening to derail it before the end of the day when all of the Bush tax cuts expire. Obama also issued a key demand regarding an issue at the heart of the remaining differences between the parties.
“Revenues have to be part of the equation in turning off the sequester,” Obama said.
That may be a non-starter for Republicans.
As of early Monday afternoon, the Dems’ latest offer, which is still changing, would lock in the Bush era tax rates for income up to $400,000 per individual filer, ($450,000 per family). It would set identical thresholds for capital gains and dividends taxes, which would rise from 15 to 20 percent.
The key sticking point, however, is the sequester. Democrats have rejected a GOP offer to delay the sequester by three months. They want to extend that deadline by a full year. But Republicans have rejected Democrats’ request to defray the over $100 billion cost cost with revenue. President Obama, as he indicated at the White House, insists on at least splitting the difference and paying for part of the sequester delay with new revenue and the rest with spending cuts elsewhere in the budget.
It’s not clear whether Republicans can accept that demand.
Negotiators hope to include a permanent patch to the alternative minimum tax, and extend a variety of business tax credits for a year. They also hope to extend emergency unemployment benefits — a $30 billion spending measure — and current Medicare physician reimbursement rates, but remain at odds over whether and how to pay for them.
But Biden’s latest offer does extend by five years expansions of the Earned Income Tax Credit and the Child Tax Credit that were part of the 2009 recovery act.
Senate Democratic leaders will have the final say over any deal amenable to McConnell and the White House. But it’s hard to imagine them rejecting an offer amenable to the President. If Senate Republicans and Democrats come to terms on a deal Monday, the real question will be whether House Republicans allow it to come to a vote, and whether it would pass.
H/T: Brian Beutler at TPM
Obama announced that the fate of a potential deal lies with Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY), who will work together to present a prospective package to their respective conferences over the weekend.
Should that effort fail, however, Obama indicated that he would call upon Reid to bring the original White House proposal — extending Bush-era tax rates on income below $250,000, among other measures — for an up-or-down vote in the Senate.
Nancy Pelosi has had enough.
She’s threatening to force a vote on extending the Bush tax cuts for the middle class, since House GOP leaders seem to only look out for the top 2%.
House Speaker John Boehner says budget negotiations with the White House have stalled.
Minority Leader Nancy Pelosi thinks she can get them started again.
In her weekly Capitol briefing Friday, Pelosi said she’ll take a procedural step to force a vote on extending the middle-income Bush tax cuts, if Republicans don’t put that legislation on the schedule themselves.
“We’re calling upon the Republican leadership in the House to bring this legislation to the floor next week,” Pelosi said. “We believe that not doing that would be holding middle-income tax cuts hostage to tax cuts for the rich. … If it is not scheduled, then on Tuesday we will be introducing a discharge petition.”
Pelosi would need 218 signatures for her discharge petition to succeed, which means a lot of Republican support. And though that support may exist in principle within the Republican conference, it’s quite another thing for members to break ranks with their leadership and enlist in a Democrat-led effort to force a vote on President Obama’s top legislative priority.
GOP leadership has dismissed this and other efforts to force a vote on Senate-passed legislation to extend most of the Bush tax cuts. And Pelosi acknowledged during her press availability that no Republicans have approached Democratic leaders to signal their support for her efforts. Indeed, discharge petitions are rarely ever successful.
H/T: Brian Beutler at TPM
House Democratic Leader Nancy Pelosi couldn’t be more clear: The Bush tax cuts for the rich have to expire.When ABC’s Martha Raddatz asked Pelosi in an interview whether she would accept a deal that did not include tax rate hikes for the rich, the House’s top Democrat had a short answer: “No.”
“The president made it very clear in his campaign that there is not enough—there are not enough resources,” Pelosi said in an interview aired Sunday on ABC’s This Week.
“Just to close loopholes is far too little money … If it’s going to bring in revenue, the president has been very clear that the higher income people have to pay their fair share.”
Despite that, House Majority Whip Kevin McCarthy (R-CA) is trying to pretend otherwise, telling Fox News anchor Bill Hemmer that Pelosi and President Obama aren’t on the same page on the budget.
There is no clear correlation between tax cuts for high earners and economic growth, according to a new study by Congress’ nonpartisan policy analyst.
“There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth,” concluded a report by the Congressional Research Service released Friday. “Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth.”
The findings are pertinent to a central debate in the presidential election, wherein President Obama is pushing to end the Bush-era tax cuts on high incomes, while his Republican challenger Mitt Romney insists on cutting rates across the board 20 percent below current policy. Democrats contrast the tax hikes of the 1990s and ensuing economic growth with the tax cuts of the 2000s and relatively meager gains that followed. Republicans, meanwhile, argue that the recovery is weak because the economy remains shackled by regulatory and tax burdens.
The study delves into the last 65 years of U.S. tax policy pertaining to high earning Americans — including top marginal rates on income and capital gains taxes — and how it impacts their decision-making. The conclusion: cutting effective taxes on the rich doesn’t boost economic growth, but it does correlate with rising income inequality.
h/t: Sahil Kapur at TPM
John Amato at C&L: Dallas Tea Party Honcho Calls Unemployment, Food-Stamp Recipients ‘Moochers’
I was watching the Dallas Tea Party leader Dennis Phillips acting like an utter buffoon on Neil Cavuto’s Your World by calling the recipients of unemployment and food stamps “moochers” as well as other niceties, while crying over the expiring Bush tax cuts. Those tax cuts are the single biggest reason why we have such a big federal debt — you know, the debt that the Dallas Tea Party is crying about. He has choice words for Mitt Romney, GOP and a tanning John Boehner too, but he’s revealed as a total crackpot just by claiming the Tea Party is nonpartisan. Please watch the video because I’m not up to transcribing any more of this segment than I absolutely have to.
CAVUTO: Do you think — is it Tea Partiers that are upset with all these guys, or particularly upset with the Republican leadership in the House, the Senate, what?
PHILLIPS: Well, I think it’s across the board. The Tea Party is nonpartisan.
Does he reside on the planet Kolob or does he think we do? Poll after poll establishes that Tea Partiers are angry Republican voters … oh, never mind with the facts.
But then he gets to the root of his resentment:
PHILLIPS: I think it is a bad thing is they let those cuts expire, we’re in the middle of a deep, deep recession … Now is not the time to increase taxes to the dwindling producers in our country when we have a president who is trying to give more money away to the moochers and welfare. We need people working, not sitting back receiving food stamps and unemployment. It’s laughable.
Yes indeed, you are laughable. You can always count on Neil Cavuto to bring on a repugnant blowhard to spew diseased speech intended to hurt those that are suffering the most in our society.
House Democrats will put Republicans on record this week voting down an extension of the middle-income Bush tax cuts unless they tax cuts that benefit the wealthiest Americans are also extended.
On Monday, Ways and Means Committee ranking member Sander Levin (D-MI) will introduce legislation mirroring a bill Senate Democrats passed last week to extend the Bush tax cuts up to a family’s first $250,000 in income.
“We should take it up, we’re going introduce it, it should pass,” Levin told reporters on a conference call. “This issue of holding hostage middle class tax cuts for those with income over a million essentially is the first order of business in my judgment that has to be addressed and resolved. … [T]here’s a hammerlock and we need to break it, and there’s a real opportunity to do that …”
A floor vote is expected Thursday.
On the Senate floor Monday morning Majority Leader Harry Reid warned House Republicans that voting to extend all of the Bush tax cuts — including for high-income earners — would be a “waste of time,” since the Senate has preemptively voted down the same legislation. The Senate passed bill, he argued, is the only viable vehicle for preventing taxes from increasing on middle class Americans.
h/t: Brian Beutler at TPM
House Republicans next week intend to vote on a plan that would both extend all of the Bush tax cuts — including those on income in excess of $250,000 — and fast-track “tax reform.” If the House GOP bill were adopted, tax reform legislation would “have special protections in the U.S. Senate, limiting the opportunities for lawmakers to use blocking tactics.”
Under the GOP’s fast-track approach, a tax reform bill would have to consist of:
(1) a consolidation of the current 6 individual income tax brackets into not more than two brackets of 10 and not more than 25 percent;
(2) a reduction in the corporate tax rate to not greater than 25 percent;
(3) a repeal of the Alternative Minimum Tax;
(4) a broadening of the tax base to maintain revenue between 18 and 19 percent of the economy; and
(5) a change from a ‘‘worldwide’’ to a ‘‘territorial’’ system of taxation.
As Citizens for Tax Justice noted, these changes would massively benefit the wealthy and corporations, shifting the tax burden down the income scale. In fact, consolidation of the tax code in the way the GOP envisions would give millionaires a $187,000 annual tax cut, while likely increasing taxes on the middle-class and working families, due to the elimination of deductions upon which they depend.
Changing to a “territorial” system of corporate taxation, meanwhile, would boost the incentive to invest overseas and push jobs offshore.
WASHINGTON — Senators blinked in the political standoff over how much of the Bush-era tax cuts to extend for another year and voted Wednesday to keep current rates for people with incomes of less than $250,000.
Tax rates would rise by 4 percent on incomes above $250,000 for couples and $200,000 for single filers. Popular breaks like the child tax credit would be preserved.
The extension, passed on a vote of 51 to 48, represents a short-term win, at least, for President Barack Obama, who has been pushing for a similar plan. But it appeared unlikely that the House would embrace a similar measure before the election, having proposed its own bill to extend all the Bush-era cuts. The House hasn’t proposed new breaks for millions of middle-class families.
Democrats estimated the GOP version would add an extra $155 billion to the deficit. They also argued that the GOP plan raises taxes on some 25 million Americans by not renewing the child tax credit, the earned income tax credit and a college tuition break.
The GOP version failed in the Senate, 45 to 54, with GOP Sens. Scott Brown (Mass.) and Susan Collins (Maine) against it, and Democratic Sen. Mark Pryor voting for it.
Republican Leader Sen. Mitch McConnell of Kentucky slammed the votes, saying they represented an irresponsible attack on the weak economy.
But Democrats argued that the Bush-era tax rates coincided with an economy that collapsed at the end of George W. Bush’s presidency, which showed some of the weakest job growth in modern history. And they said it would be another giveaway to the wealthy, while taking away middle-class breaks.
"The wealthiest taxpayers in America would get back $160,000 a year from the Republican tax plan," said Sen. Barbara Boxer (D-Calif.), chiding McConnell that his suggestion to "do no harm" for a year was not a sensible middle ground, considering the cost.
"It’s not a compromise," Boxer said. "It’s going right back to the problems that led us to this in the first place."
The House is expected to vote on its bill next week. Although revenue measures are supposed to start in the House, Democrats said they should take up the Senate plan, rather than raise a so-called “blue slip” procedural block.
The Senate vote was by a rare simple majority, which Sen. Chuck Schumer (D-N.Y.) said McConnell allowed because it was the only way he would get a vote on the GOP plan, and his caucus didn’t want to be stuck only voting “no” on the Democratic plan.
Schumer suggested the political reality of needing to back the middle class would prompt action by House Speaker John Boehner (R-Ohio).
h/t: HuffPost Politics
You can see a larger version of the graphic showing where these tax havens are HERE.
“The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments.”
~James Henry, former chief economist at consultancy McKinsey
It is important to understand that those very same loopholes that high net worth individuals are using to hide $21 trillion in offshore banks safe from taxation and leaving the undue burden on the rest of us …. those loopholes are also being used by drug cartels and terrorist organizations to fund their organizations. These loopholes have a term – it’s called money laundering … and apparently the banks are not aware that this is illegal. This makes me think of four separate points:
#1 – Romney’s $100 Million IRA in Offshore Accounts
It i’s precisely this use of money laundering and manipulation of the banking system and laws that leads one to step back and reflect on the recent story that Mitt Romney has as much as $100 million in his IRA’s and offshore tax havens (source). Since we have yet to see Romney’s tax returns – we are unable to determine whether or not his actions were legal or illegal and I submit that it’s very unpatriotic for a presidential candidate from one of the leading political parties to hide behind these tax havens that offer almost no transparency. How does one amass $100 million in an IRA? If Romney has nothing to hide – why would he not show all of his cards proudly like his father and like President Obama? Is he embarrassed that he potentially used the same methods as that of terrorist organizations and other tax cheats who are laundering their money?
#2 – Tax cuts for the rich
We know that the rich, corporations, terrorist organizations and drug cartels are hiding their money in offshore tax havens free from taxation and transparency. If we know that at least $21 trillion is being hid by the global elite in these secretive bank accounts – how can anyone continue to espouse the idea of greater tax cuts for the wealthy without eggs being thrown at them in public? The rich are doing very well; in fact – much better than they would have us know. Why should we be giving MORE tax cuts?
#3 – The Gloves Are Off
There is zero question about the legality of this behavior. Failing to pay taxes on offshore income is against the law and a person is subject to jail time if they are found in violation of this law. In 2009 – the IRS gave criminal amnesty to American tax cheats if they would openly acknowledge their overseas hidden accounts and in return paying the appropriate back taxes. Many people have stepped forward, but the IRS will not publish the information of WHO did or did not. I’m ok with that. But – now that people have been given an opportunity to claim responsibility and take their hicky … it’s time to twist the screws on these tax cheats.
It’s time to go after these people breaking the law … line them all up in one room like we treat common thieves and try them all for tax fraud and money laundering. Throw the largest legal book we have directly at their face. Put them in jail … confiscate property for failure to play nice … do whatever is legally available to penalize and punish, punish, punish these tax cheats. We need to send a message and punishment will be painful and not worth trying to game the system. And if you don’t like it – go live in another country … someone else will take advantage of the tremendous market opportunities available in the U.S.
#4 – These tax cheats are hurting you
Most people do not understand the flow of money and the inter-reliance between individuals. Not only are these tax cheats hurting you by paying less in taxes and leaving a larger tax burden to the average middle class person … they’re also taking important money out of the system which leads to economic decline and lost jobs. Every dollar taken out of the American financial system hidden to avoid taxes is a dollar that isn’t stored in a bank …. that money is then not used to loan money to people to start businesses etc. Not only are these rich folks failing their responsibility to pay taxes … they’re contributing to the downfall of our economic system by taking money out of the system.
“This new report focuses our attention on a huge ‘black hole’ in the world economy that has never before been measured – private offshore wealth, and the vast amounts of untaxed income that it produces.”
The Guardian has a must read story HERE:
He shows that at least £13tn <$21 Trillion U.S.> – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy“. According to Henry’s research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.
The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor. According to Henry’s calculations, £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world’s population – a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.
And Heather Stewart adds this about the offshore funds HERE:
In total, 10 million individuals around the world hold assets offshore, according to Henry’s analysis; but almost half of the minimum estimate of $21tn – $9.8tn – is owned by just 92,000 people. And that does not include the non-financial assets – art, yachts, mansions in Kensington – that many of the world’s movers and shakers like to use as homes for their immense riches.
“If we could figure out how to tax all this offshore wealth without killing the proverbial golden goose, or at least entice its owners to reinvest it back home, this sector of the global underground is easily large enough to make a significant contribution to tax justice, investment and paying the costs of global problems like climate change,” Henry says.
He corroborates his findings by using national accounts to assemble estimates of the cumulative capital flight from more than 130 low- to middle-income countries over almost 40 years, and the returns their wealthy owners are likely to have made from them.
And just Tuesday – HSBC based in London – was busted for it’s willful ignorance using these loopholes to launder money for terrorist organizations in part thanks to a U.S. Senate Permanent Subcommittee on Investigations led by Senator Carl Levin (D-MI). In other words – they were turning a blind eye; they knew what was going on but it was too profitable to stop. In short – they were complicit in these illegal activities.
You can watch the long but dramatic hearing HERE. If you don’t have the time to watch a 3 hour hearing … you can watch a four minute recap by the Wall Street Journal below. Another important point of topic is that almost every international bank if not EVERY international bank is very likely in engaged in this type of unscrupulous behavior.
Deutsche Welle has the story HERE:
The charges against HSBC were severe. “Global banking giant HSBC and its US affiliate exposed the US financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls,” an official Senate statement began.
The report had five separate charges against HSBC, including servicing high-risk affiliates, circumventing US safeguards, clearing suspicious bulk travellers checks, and offering accounts to so-called bearer share corporations – companies considered to be particularly prone to criminal dealings.
But possibly the Senate’s most damaging charge is that HSBC ignored possible terrorist financing links, particularly in its dealings with banks in Bangladesh and Saudi Arabia. One of these, according to the report, was Saudi Arabia’s Al Rajhi Bank, a known al-Qaeda financier.
The Guardian adds more on the HSBC investigation HERE:
But while the headlines have been about cocaine cartels, the most troubling aspect of the Senate’s investigation is that the criminal, often violent, activities of the drug lords were facilitated by a byzantine, albeit legal, infrastructure that made tracking their activities near impossible.
This is particularly true of the subsidiary set up in the Cayman Islands by HSBC’s Mexico division that handled some 60,000 accounts. According to the report, the drug lords used these accounts to fuel their jet-set lives. But, staggeringly, HSBC’s oversight was so lax it knew nothing about who was behind 41% of the accounts.
This lack of transparency is troubling. Tax avoidance is big business. A report by the TUC found that the UK’s four largest banks – HSBC, Barclays, Lloyds and RBS – have some 1,200 subsidiaries in tax havens. At a time when the banks are in the dock following a spate of scandals that have exploded the arguments for “light-touch regulation”, the lack of oversight afforded by structuring transactions through tax havens threatens further scandals.
The Wall Street Journal reports that the compliance officer from HSBC is resigning HERE:
During a daylong hearing before a Senate subcommittee, HSBC’s top antimoney-laundering executive announced he is stepping down. Bank officials outlined millions of dollars in increased spending on compliance efforts.
A yearlong investigation by the Senate Permanent Subcommittee on Investigations alleged HSBC’s U.S. bank became a conduit for money-launderers and potential terrorist financiers, and for the evasion of sanctions against Iran and other countries. The committee’s report, released before the hearing, also found “systemic failures” at the bank’s main U.S. government regulator, the Treasury Department’s Office of the Comptroller of the Currency.
Irene Dorner, chief executive of HSBC’s U.S. bank since January 2010, delivered an official apology to lawmakers. “We deeply regret and apologize for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public,” Ms. Dorner said. “HSBC’s compliance history, as examined today, is unacceptable.”