PAUL JAY: Welcome to The Real News Network.
I'm Paul Jay in Baltimore.
And we're continuing our series of interviews about offshore tax havens, $20-$30 trillion
at least involved in money that's being hidden from various governments around the world
so that they cannot be taxed.
And, of course, the biggest banks of the world are helping engineer all of this.
And all of these biggest banks, one way or the other, do business in the United States
and in theory should be touched by American regulation.
So where is the regulation?
And is there any transparency for all of this?
Now joining us to talk about possible public policy solutions to this is James Henry.
He's an economist, attorney, investigative journalist.
James served as chief economist at the international consultancy firm McKinsey & Company.
He's on the global board of the Tax Justice Network, and he was the lead researcher of
the recently released report The Price of Offshore Revisited.
Thanks for joining us again, James.
JAMES S. HENRY: You're quite welcome.
HENRY: So I guess the demand is there needs to be transparency.
And you'd think it'd be kind of obvious that the governments of Europe and North America
could, if they had any motivation, make these banks disclose all of this.
Is anything happening on that front?
HENRY: You know, you have the OECD talking about these issues for more than a decade.
Since 1995, they started tackling so-called offshore havens.
But their approach to the problem was to single out little islands like, you know, Vanuatu
and Nauru in the South Pacific and the Seychelles, Mauritius.
You know, there's a laundry list of about 80 of these little island players.
And at the end of the day, very little was accomplished with all of that blacklisting.
This industry has not gone away; it's just shifted to other places.
The orchestrators of this, the systems operators, if you will, are the big banks that we described
before, the largest players in the world.
And they are, you know, sort of--they don't really care whether one particular haven lives
or dies; they'll just move on to the next one.
So this requires collective action.
We just haven't been able to get the political will together to have that, because, you know,
at the end of the day, many of the countries involved in this are First World countries
like the United States, the U.K., Switzerland, that have a big stake in the game continuing
on as it has.
So one of the things you see in the pattern of prosecutions, even when you have a big
serial violator like a Citibank or a HSBC--.
HSBC was recently handed a $1 billion fine by the Department of Justice, three weeks
ago, for laundering $14 billion of cartel money.
But, you know, HSBC is a huge institution and it has $20 billion of profits last year,
so that's like a parking ticket.
What you don't see is the Justice Department willing to go in and shut one of these institutions
down like they did with BCCI back in the 1990s.
BCCI was a Pakistani bank that was involved in all kinds of chicanery and money laundering
and arms dealing.
But, you know, so is HSBC.
I mean, they were facilitating trade with Iran, they were facilitating the Colombian
cartel laundering money, and they were telling their compliance officers to back off.
So this is an organized conspiracy.
It went right to the top.
And yet you have--the current chairman of HSBC is a guy named Stephen Green.
He's actually a reverend in the Anglican church.
He is the current sitting U.K. trade minister in the U.K. in David Cameron's Conservative
government.
This guy is the chairman for ten years of this criminal enterprise.
So there's very little will power on the part of the U.S. Treasury or the authorities in
the U.K. so far to crack down on HSBC.
That's just one example.
There are numerous others of where these large institutions have been able to have virtual
impunity for, you know, not only their role in the financial crisis and their Libor rate
rigging and their--.
JAY: Yeah.
What do you make of the media coverage of all of this?
I mean, you've got the media constantly talking about the crisis, the debt crisis, both in
the United States--they talk about the European debt crisis and the--you know, we get practically
apocalyptic in the language.
But you never hear discussion about, well, if there's such debt, how about going after
all this offshore money.
I see almost no mainstream media coverage of the issue.
HENRY: Well, it's abysmal.
I mean, I've been writing about this topic basically since the early '80s, and I've had
a chance to look at the media coverage in detail.
You have--a lot of journalists don't know anything about the subject and are moving
from one story to another, so you're getting--you know, like this week, I had two minutes on
CNN to explain this topic, and half of it was devoted to the response that they had
to get from the conservatives, none of whom had--I would describe them not as conservatives
but as reactionaries, none of whom had read my paper or had, you know, bothered--they
just had the kind of knee jerks as response.
But there's this notion of fair and balanced that they had to dig in.
The second bias that, you know, sort of novice journalists have is that they tend to target
the public sector.
It's easy to rail against government.
But, you know, we tend to forget that this latest financial crisis was not really made
in Washington; it was made by this lobby, by this very influential bunch of banks around
the world that pioneered securitization.
And, you know, I knew them very well at McKinsey when we were there.
They were--we started talking about securitization as a strategy banks ought to have, and it
proliferated from the 1980s on throughout the industry to the point where they were
securitizing student loans and real estate and car and cars and everything else and selling
securities to people that they didn't understand.
So what happened over time was that this banking industry basically had its way with the regulators
in Washington as a result of the vast amount of influence they were wielding and the money
they were flashing around.
So, you know, this is not an uncaused cause.
And it's not the public sector in the European case or in the United States that was responsible
for the origination of this economic downturn which then led to financial crisis in the
public sector because of all the collapse of tax revenue and the continuing spending
that had to be done just to keep hospitals and schools and roads, you know [crosstalk]
JAY: Right.
So if you have a situation where, you know, some people have described this as sort of
parasitical capital, but if you have a situation where they deliberately and fraudulently manipulate
global interest rates, they deliberately help the super rich avoid tax--and add to that
an enormous amount of manipulation going on on the price of commodities, both in terms
of hoarding and creating psychological bubbles for shortages and such, to raise prices--and
then taking advantage of the low price of commodities in order to increase concentration
of ownership, but you have this little financial elite with so much political power that they
don't get regulated, so what do we do?
HENRY: Well, you know, I'd like to describe this first of all as a market-based solution.
I have--my very good friend Professor Kotlikoff, who's at BU, is a lifelong Republican.
No one I've ever heard gets more agitated and upset about the behavior of these big
financial institutions than he does.
And, you know, we've lately decided to--collaborated on an article where we talk about supporting
Sandy Weill's latest proposal.
Sandy Weill was the chairman of Citibank in 1990s and helped to get the Glass-Steagall
Act repealed by working his way in Washington.
That allowed these big mergers of financial institutions and allowed investment banking
and retail banking to come together.
Sandy Weill called for reinstituting Glass-Steagall, which would basically require us to break
up these investment banks that have merged which retail banks.
And so, you know, this notion of actually breaking up the big banks as a step beyond
regulation is one that I think--you know, Kotlikoff and I are now working on an article
that would argue for breaking these banks up, not only on a basis of needing to bring
back Glass-Steagall and to stop the speculation, but also that, you know, we've had an enormous
amount of criminal behavior here.
This is--from one standpoint, these institutions are, you know, too big to be honest, and they're
kind of beyond the reach of any particular country's jurisdiction.
Even the United States has trouble doing anything but reaching a deferred prosecution agreement
with HSBC or UBS.
They just seem reluctant to break them up.
JAY: But is part of the problem here that the elites in the different countries, too
many of them are on this gravy train, and that's where the political power is?
HENRY: Yeah, well, who do you think has these offshore assets with these banks?
I mean, who do you think is being lobbied every day by these institutions which have
enormous inside access?
And who is, in the case of the U.K. we described before, serving as the minister of trade but
the chairman of HSBC?
There's a revolving door here that goes on within the elite.
So it's kind of a club that we need to break up.
And I don't think that's a--you know, I consider myself an independent, not a Democrat or a
liberal.
I'd like to see capitalism healthy and wealthy and have all of us being able to participate
in that if we can achieve that.
But in this situation it seems like a tiny few have been able to get a lockhold not only
on the wealth, but also on the political influence.
JAY: Well, we'll see if--perhaps that horse left the barn a long time ago.
I'm not sure you can put it back in again.
But I wish you well.
Thanks very much for joining us.
HENRY: Thank you.
JAY: And thank you for joining us on The Real News Network.