Swiss Bank Turns in Big Cheeses

Some very wealthy Americans will be choking on their coffee this morning as they read in the Wall Street Journal and New York Times that Swiss bank UBS has agreed to hand over the names of about 250 account holders as part of a $780 million settlement with U.S. prosecutors. In what the WSJ calls a "significant break from Switzerland's tradition of banking secrecy," UBS will give up the names of Americans whom the IRS suspects used offshore accounts at the bank to evade taxes. Federal prosecutors have alleged that, from 2002 to 2007, UBS helped U.S. clients illegally hide $20 billion, allowing them to evade $300 million a year in taxes. The deal could have far-reaching implications for a banking culture that has been based on discretion and secrecy since the Middle Ages. “The Swiss are saying that this is the end of Swiss banking as they knew it,” Jack Blum, an offshore tax specialist told the NYT, adding, “Nobody will trust the security of the Swiss bank account.”

Sticking with the long arm of the law, it appears that U.S. tycoon Sir Allan Stanford may be on the lam following Securities and Exchange Commission charges that he ran an $8 billion deposit fraud through his Antigua-based Stanford International Bank, the Guardian reports. It quotes U.S. TV stations as reporting that "Stanford had attempted to leave the country by private jet from Houston to Antigua, but the plane leasing company refused his credit card." The SEC charges have prompted panicked savers into a rush to withdraw their funds from Stanford banks in Antigua and Venezuela, the Financial Times reports, while the Guardian describes how the island of Antigua could be hit badly by the fraud allegations, given that Stanford is the island's biggest investor and private employer. It quotes Prime Minister Baldwin Spencer, who somewhat failed in his attempt to calm the nation when he said in a national TV address: "The fall-out threatens catastrophic and immediate consequences. ... There is no need for panic." Various regional SEC branches had been sniffing around Stanford's sale of certificates of deposit for years, but it was only after the Bernie Madoff Ponzi scheme came to light that the watchdog went into "high gear," writes the WSJ. One nation particularly badly hit by the alleged Stanford scam is Venezuela. As the WSJ writes, "In a region long synonymous with currency crashes and bank collapses, a number of Latin Americans said they saw investing with Mr. Stanford as a way to safeguard their savings in dollar-denominated accounts."

Some relief for distressed homeowners now: Between 7 million and 9 million mortgaged Americans may be able to refinance their home loans or renegotiate payments via a $75 billion foreclosure-fighting package unveiled yesterday by President Obama. It is a plan, the Washington Post writes, that "goes beyond what some analysts had expected and was welcomed by many of the nation's top lending institutions." The nation's business pages tried to figure out just who wins and loses with this plan. According to the NYT, homeowners whose debt load is greater than 105 percent of the home's value—the seriously "under water"—would not qualify. CNNMoney.com says, "Those with 'jumbo' mortgages"—loans above $417,000—"also don't qualify." It wasn't just homeowners who got a helping hand yesterday. The Obama administration on Wednesday "doubled its commitment to lenders Fannie Mae and Freddie Mac, promising to reimburse the companies for up to $400 billion in losses on their investments in mortgage loans," the Washington Post writes.

And now for some unwelcome news: It could take years, not quarters, to recover from the current recession. That's the bleak view offered by the Federal Reserve on Wednesday. "The unemployment rate will remain elevated through at least 2011, according to the policymakers' official forecast, released yesterday, and the economy this year could shrink by 1.3 percent. That would mark the sharpest contraction in 27 years," the Washington Post writes. The WSJ adds that the unemployment rate could top 9 percent by year-end and probably won't "return to a normal rate of about 5% before 2012 at the earliest."

General Motors bondholders are not impressed by the struggling automaker's latest turnaround plan in which it calls for 47,000 job cuts and eliminating half its brands. "The question is, did they go far enough, or are they just layering debt onto debt?" a source close to the group told the WSJ. "They need the company to drive hard so it is competitive soon, not in 2012." Convincing the bondholders it can reduce its debt load is key to any future financing for GM. According to the NYT's DealBook blog, GM bondholders are pressing for better terms and could demand even further cuts.

Meanwhile, the market outlook for PCs and printers is going from bad to worse. Industry bellwether Hewlett-Packard yesterday reported "declines in nearly all of its major business areas" for the previous quarter and forecasted more pain to come, MarketWatch reports. The NYT called it a "stunning reversal in its outlook for the fiscal year." Just three months ago it looked as if HP might weather the global tech spending downturn.

Finally today, it's not surprising that, in this Mickey Mouse of a global economy, Disney is being forced to restructure its U.S. resort operation and cut an unspecified number of jobs. Attendance at Disney's domestic parks during the last quarter was down 5 percent from a year earlier, and even operating income declined 24 percent to $382 million.