Swiss Banks' Tax-Evasion Secrets; Taxi Lenders' Woes

Breaking News This Morning ...

Earnings: Huntington Bancshares, Iberiabank, Community Bank System

Receiving Wide Coverage ...

Thain's Exit: Everyone takes a look at John Thain after he announced his pending retirement as head honcho of CIT Group. Thain's narrative is re-told, as he departed Merrill Lynch with the Wall Street bank in a mess, returned to CIT to implement a turnaround and exited after the crowning achievement of the OneWest Bank acquisition. All the reports mention his successor, Ellen Alemany, but only in passing. Go to American Banker for more on Alemany Wall Street Journal, Financial Times, New York Times

Wall Street Journal

Roger Federer, the Matterhorn, army knives and secret tax havens. What could be more Swiss than a bank that loads funds onto an untraceable debit card? Or another bank that let a client convert Swiss francs into gold and then allow the bullion to be stored in a relative's safe-deposit box? Those are some of the secrets that Swiss banks have divulged to the U.S. Justice Department over the past year, as part of their plea agreements to avoid prosecutions. Swiss banks have been targeted by U.S. officials for undeclared, offshore accounts that let clients eschew paying U.S. taxes.

Some of the Swiss banks caught up in the probe you've heard of: Credit Suisse and UBS, for example. Others, maybe not. Bank Sparhafen Zurich: does that name ring a bell? Then there's BSI SA of Lugano; St. Galler Kantonalbank, controlled by the canton of St. Galler; and Migros Bank in Zurich. Bank Sparhafen Zurich had a policy where it would hold clients' U.S. mail, out of clients' fear the U.S. government would go through it.

The rise of Uber has spelled trouble for banks that lend to the holders of taxi medallions, as American Banker readers already know. The Journal takes a moment to key in its readers. BankUnited, which is based in Miami Lakes, Fla., but does lots of business in New York, said Wednesday it's worried about the collateral (577 taxi medallions) underpinning its $214 million in outstanding loans to taxi firms.

Signature Bank in New York was compelled to increase the size of its loan-loss provision because of its exposure to taxi medallions. Citigroup has started foreclosure proceedings on 46 medallion loans. Regulators seized Montauk Credit Union in New York last month because it was overwhelmed by delinquent taxi medallion loans.

Progressive Credit Union in New York has about 85% of its $624.7 million loan portfolio in taxi medallion loans. Robert Familant, CEO, said the CU has a large capital cushion to protect against potential losses. Melrose Credit Union in Briarwood, N.Y., has about two-thirds of its $2 billion loan portfolio in taxi medallions, but is testing a new type of loan that might be eligible for government backing. (Shouldn't this raise a red flag to credit union regulators worried about asset-class concentration?)

If Fed officials can't make up their minds whether to raise rates, how are banks supposed to predict what will happen? Bank executives have been more-or-less guessing how the Fed will act, in terms of planning for the future.

The European Union's Court of Justice ruled that Bitcoin is currency, not a commodity. Thus, Bitcoin is exempt from tax on currency transfers.

New York Times

The paper offers some tips for how to cope if your prepaid debit card fails, as happened this week with Russell Simmons' RushCard product. If your wages are deposited directly onto the card, contact your employer's payroll department and put a stop on the direct deposit; then, redirect the payment to a new prepaid account or ask that it be issued as a check. If you incur fees for late payments or other missteps, try to negotiate a fee waiver.

Washington Post

President Obama tapped a Dodd-Frank critic to serve as a member of the Securities and Exchange Commission. Hester Peirce of George Mason University has written articles and a book criticizing Dodd-Frank; her former boss is Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee. Obama's other nominee, Lisa Fairfax, is a corporate governance expert at George Washington University. She would become only the third black commissioner in the SEC's history.

Elsewhere ...

The Atlantic: The opacity of the global financial markets is deliberate, British economist John Kay writes in a new book, “Other People's Money: The Real Business of Finance.” “The complexity of modern finance has been designed, and has operated, principally to benefit financial intermediaries rather than the users of financial services,” Kay writes.