Offshore Banking, Fraud, and the Crisis

Published on Triple Crisis, by Sara Hsu, January 16, 2014.

The global financial crisis that began in 2008 in the United States had roots in offshore banking, some of which have been revealed: the Bear Stearns’ 2007 Cayman Island hedge fund bankruptcy, in which the company attempted to file offshore to protect U.S. assets, Goldman Sachs’ off balance sheet Cayman deals in shaky asset-backed securities (ABSs), and Citigroup’s creation of structured investment vehicles in London to hide the sales of ABSs.  

These offshore banking centers, which include locations such as Luxembourg, the Netherlands, and Bermuda, were safe havens for large American banks that wished to move collateralized debt obligations (CDOs) and other asset backed securities off their balance sheets, and away from the scrutiny of auditors and shareholders.

Many of the large financial corporations were engaged in these dealings and created structured investment vehicles, many of which were held offshore.  While we may never know about all of these dealings, some rough calculations performed using the SEC’s Edgar database and offshore classification from the Tax Justice Network reveals interesting statistics on offshore entities held by major financial corporations … //

… When we look at the offshore holdings for Bank of America by dollar amount, the explosion in offshore entities becomes less of a concern, since the cross-border holdings decline after the crisis.  If data on Wells Fargo was not reported because the dollar amount of cross border holdings was too low to report, then this also eliminates Wells Fargo as a fraud concern.

However, Citigroup, JP Morgan, Goldman Sachs, and Morgan Stanley do cross-border business in the double- and triple-digit billions, and for Citigroup and JP Morgan Chase, this business appears to have mainly grown over the crisis period.  Because of this, I have flagged JP Morgan Chase and Citigroup for further investigation.  We know that both JP Morgan and Citigroup have previously been involved in shady offshore dealings; JP Morgan was allegedly involved in both the Enron and Madoff scandals, while Citigroup helped launder money for the family of Augusto Pinochet, an infamous Chilean dictator—not very good precedents.

We also know that both companies have participated in dubious activity in the lead-up to the financial crisis, and have been accused of fraud in knowingly selling bad assets.  So what happened?  Perhaps they were participating in something illegal but didn’t want to attract attention by increasing the number of offshore entities as much as Bank of America and Wells Fargo did, since that is what fraud investigators were looking at.  How they enriched themselves during the ongoing crisis, I really cannot say.  Detailed offshore records cannot be obtained, so perhaps we will never know.  Something to further shake one’s confidence in the U.S. financial system.

(full text and two tables).


Hopefully, Britain will decide to leave the declining EU bloc, on Russia Today RT, January 16, 2014;

Chelsea Manning awarded 2014 Sam Adams Prize for Integrity in Intelligence, on Russia Today RT, January 16, 2014;

Wenn Sie fest mit einem Wirtschaftskollaps rechnen, betrachten Sie einfach nur die Lage in Europa, im KOPP-Verlag, von Michael Snyder, 11. Jan 2014.

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