Romney As The Chief Cop to Find and Tax Trillions in Hidden Wealth?

July 30, 2012

By Joe Rothstein
Editor, EINNEWS.com

So, just how many trillions of dollars have the super rich hidden away in secret bank accounts to avoid paying taxes?

$32 trillion? $21 trillion? Or a mere $8 to $9 trillion?

The fact that we’re talking trillions isn’t in dispute. Neither is the fact that many of the world’s largest banks are complicit in sheltering enormous wealth for those who should be paying their share for the orderly society that helped them amass their fortunes.

To put the enormity of this deception in perspective, the value of all goods and services produced by all those working in the U.S. in 2011 totaled about $15 trillion. Or look at it this way: The size of these unreported financial assets is larger than the combined GDPs of the United States and Japan.

The latest incarnation of outrage over hidden wealth was triggered by a research report that pegged the amount of the stashed loot at $21 trillion. This particular report made news because of the credentials of its author, James Henry, the former chief economist at McKinsey & Co., the mega-firm that specializes in consulting with the rich and richest corporations about how to make more money. Henry is now senior consultant to the Tax Justice Network, which commissioned the report.

Not only did Henry document what he considers the mind-numbing success of the super rich to avoid taxes, he suggested that even $21 trillion might be too low a number. And for good measure he discussed the “often unsavory role” played by banks in accommodating their efforts to hide the money.

“Unsavory” is about the lightest shade of gray you can use to paint the industry’s behavior. Just in the past few weeks we’ve learned:

--The largest banks manipulated the LIBOR rate to suit themselves and cheat others, apparently with the knowledge of Secretary Geithner and the U.S. Federal Reserve.

--HSBC systematically laundered money for drug dealers.

--JPMorganChase had to confess that its billions in trading gambling losses is spiraling higher. Much higher.

--Capital One got caught with its hand in customers’ wallets, deceiving them about products they didn’t need or want.

Is it any wonder why Wall Street’s ability to inspire public confidence is about as low as current interest rates?

In his report, Henry pulled no punches about how so much wealth could be hidden from normal financial channels. “It turns out,” he says, “that this offshore sector, which specializes in tax dodging, is basically designed and operated, not by shady no-name banks, but by the world's largest private banks, law firms and accounting firms, headquartered in First World capitals like London, New York and Geneva.

"Since most of missing financial wealth belongs to a tiny elite, the impact is staggering. For most countries, global financial inequality is not only much greater than we suspected, but it has been growing much faster."

“Elite,” in this instance, can be defined as 1) those who have amassed the wealth 2) banks like Goldman Sachs, Bank of America, Credit Suisse, HSBC and UBS, which have “private wealth management” departments 3) the lawyers and accountants who advise and sanctify such behavior, and 4) the government officials who look the other way and block tax authorities from the records.

All of this adds up to the loss of at least $280 billion a year in tax revenue, according to Henry’s report. That’s a loss that needs to either be covered by higher taxes on the rest of us or lost projects and services that people need.

Henry believes his $21 trillion estimate is on the low side because it doesn’t include non-financial assets such as real estate, yachts and artworks. He speculates the number could be as high as $32 trillion.

A few years ago leaders of the G20 group launched a campaign to find and tax the hidden trillions, a campaign that has had some success in prying open Swiss bank accounts and other obvious buried treasure. But as with any project that takes government action, particularly action by governments themselves often held hostage by their richest financial institutions, it’s been a slow slog.

Which brings me back to Mitt Romney.

Romney, as we now know, has had accounts in Swiss banks and the Cayman Islands. In many ways he’s the poster boy for the campaign to resist unearthing hidden wealth. His offshore accounts are secret. He refuses to reveal more than one year’s worth of tax returns. And suspicions abound that he may have taken advantage of an amnesty the U.S. offered tax scoff laws a few years ago to repatriate money without paying a penalty.

One way to think of a Romney presidency is that since he’s tunneled money and knows where and how to do it, he would be a great cop in the hidden money chase. Another way to think of it is that since he’s bringing in hoards of campaign money, obviously from those who can contribute millions, and has sanctified the secrecy behind those contributions, he would be the last guy to go after friends and contributors.

Big fines and public embarrassment bounce off the 1 percent making hardly a dent. They just go on doing what they’ve been doing. They continue to rack up record profits and income while the wealth gap continues to widen.

It’s going to take a major public revolt against all of this to change not only the laws, but to ramp up the enthusiasm of our lawmakers and regulatory bodies to go up against all of the growing and entrenched wealth.

It’s inconceivable that would happen with Romney in the White House and Boehner and McConnell running the House and Senate agendas.

(Joe Rothstein can be contacted at joe@einnews.com)