The oldest Swiss bank has pulled out of the U.S. and advised clients to get out of U.S. securities.
St. Gallen-based Wegelin (founded 1741) advises that U.S. clients may become global pariahs. Can this possibly be true? For what reason, and who is to blame?
As a test, I spent considerable time over the last couple of months attempting to open a bank account in Switzerland. I sent many e-mails and conducted substantial research into the matter. No go! Each contact I made said no thanks—that bank was no longer taking new American clients. I checked with an old-line Swiss bank with which I had opened an account in the 1970s. No luck there, either. Moreover, where current U.S. client relationships are being retained, a raft of relationship-disturbing rules has been initiated. Were I presently a client, I doubt I would be able to function under the new set of rules. What’s up with this?
Wegelin, St. Gallen
I’ll tell you what’s up and exactly who is to blame. According to the Swiss, the blame is with our own government. How familiar are you with The Foreign Account Tax Compliance Act (FACTA)? Sure doesn’t have a good ring to it, does it? Well this super restrictive, hostile act has been put into place by President Obama’s administration and the Barney Frank–influenced Congress. The new law requires all foreign financial companies to supply information on American clients to the Internal Revenue Service. Moreover, these Swiss financial institutions are compelled to withhold 30% of U.S. interest and dividend payments from Americans who provide inadequate information to determine their U.S. status. Can you imagine the potential hassle and red tape?
I have zero interest in hiding any earned income from the IRS. I do, however, have great concern about this U.S. government overreach, which will negatively impact the lives of American expats living abroad.
This legislation clearly compromises the liberty and freedom of every American. Where the heck does the Constitution authorize such strenuous overreach into the financial dealings of American citizens? I encourage you to review Article I, Section 8, of the Constitution. It takes only a matter of minutes, as the article that enumerates the powers of Congress has only about 500 words. Yes, Section 8 does authorize Congress to provide and maintain a navy. I also see where this amazingly concise and clear article authorizes Congress to establish post offices and post roads. But there is no mention of compelling Swiss banks to fork over confidential information on American citizens.
The Obama administration and the Democrat-controlled Congress saw to it that FACTA was incorporated into jobs legislation, as the Swiss have alerted clients. Who were the Republicans who bought into this boondoggle? Let us hope that Republicans in the new Congress immediately put together a bill that rescinds FACTA. You can help the cause by e-mailing, phoning, or visiting your House member. I am continuing my research on the rights of Americans to open a foreign bank account, as what I have learned smacks of currency controls and an unconstitutional attack on my and your freedom. I will continue on this theme in my monthly Richard C. Young’s Intelligence Report and in Young Research’s Global Investment Strategy.
Further reading:
The Trouble with FATCA – Arden Dale, The Wall Street Journal, August 2010
FATCA Is Overkill – Charles Rubin, Rubin on Tax, November 2010
The Foreign Account Tax Compliance Act – Kevin E. Packman, Esq. and Mauricio D. Rivero, Esq., Journal of Accountancy, August 2010
Republicans who voted for FACTA:
Senators: Lamar Alexander [TN], Robert Bennett, Christopher Bond, Samuel Brownback, Thad Cochran [MS], Susan Collins [ME], Judd Gregg, Kay Hutchison [TX], George LeMieux, Lisa Murkowski [AK], Richard Shelby [AL], Olympia Snowe [ME], David Vitter [LA], George Voinovich
Congressmen: Judy Biggert [IL-13], Anh Cao, Shelley Capito [WV-2], Charles Dent [PA-15], Lincoln Diaz-Balart, Mario Diaz-Balart [FL-21], Vernon Ehlers, Mary Fallin, Rodney Frelinghuysen [NJ-11], Jim Gerlach [PA-6], Walter Jones [NC-3],Leonard Lance [NJ-7], Steven LaTourette [OH-14], Frank LoBiondo [NJ-2], John McHugh, Tim Murphy [PA-18], Sue Myrick [NC-9], Todd Platts [PA-19], Dave Reichert [WA-8], Harold Rogers [KY-5], Ileana Ros-Lehtinen [FL-18], Christopher Smith [NJ-4], Michael Turner [OH-3], Frank Wolf [VA-10]
Those senators and congressmen without designations for their area represented have either retired or were defeated in their reelection.
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