The rich are different from you and me. They have Swiss bank accounts.
Well, at least Mitt Romney does.
That was one of the big revelations when Romney released his tax records in January -- a revelation that Vanity Fair recently looked into, along with the rest of his finances. Of course, it's no secret that Mr. Romney is a man of means. But what is still secret is just how Romney has invested those means.
Maybe not so much secret as secretive. Romney has released his return for 2010 and an estimate for 2011. So we have a broad outline of what his personal finances look like. And they look something like an Epcot of financial investments: There is a blind trust with offshore accounts in Switzerland, Bermuda, and the Cayman Islands -- not to mention an almost comically large IRA account. None of this is illegal. But it has raised questions about Romney's Caribbean tax havens and his Swiss bank account. The former makes sense. The latter not as much.
Question #1: Remind me: Why does Romney have money in the Caribbean?
Let's take a quick detour. Imagine that a tax-exempt entity -- like a university endowment -- buys or otherwise acquires a business. Maybe a macaroni company. That company would have a nice little competitive edge. It wouldn't have to pay taxes. That's exactly what happened when some wealthy alums donated the Mueller Macaroni Company to the New York University Law School in 1948. This loophole prompted Congress to close it 1950. Only a tax-exempt entity's "related" businesses would in fact be tax exempt. Everything else would be taxed as "unrelated business income".
What does this have to do with Mitt Romney? Well, university endowments and public pensions are some of the biggest investors in private equity funds like Romney's Bain Capital. Those investors don't want to be hit with the unrelated business tax -- so Bain Capital sets up shop in the Caymans where it can avoid the unrelated business income tax. You might still be wondering: What does this have to do with Mitt Romney -- at least now? He left Bain Capital in 1999 (or 2001). He did, but he didn't. He still gets a share of Bain Capital's profits every year as part of his retirement package. And Bain still has corporate blockers in the Caymans. That's why Romney has investment income from the Caymans.
Question #2: Why does Romney have a Swiss bank account? And what's so great about a Swiss bank account versus any other tax haven?
Swiss banks are the gold standard of tax havens because of their secrecy and stability. Actually, that sentence should be in the past tense. Swiss banks are not nearly as secret as they used to be. Time was, the Swiss government jealously guarded its banks' reputation for never revealing client information. It was a crime to do so. High-net individuals the world over flocked to the Alps to hide money from tax collectors back home. But that started to change in 2008. A former UBS banker came forward with tales of how he helped wealthy American clients evade taxes -- including such charming details as smuggling diamonds in tubes of toothpaste. The IRS launched an investigation, and came up with a list of 52,000 names it wanted from the Swiss banking giant. A settlement followed, and then a new U.S. law. Now foreign banks have to cooperate with the IRS or face fairly tough penalties. Auf Wiedersehen, Swiss banking secrecy über alles.
But Swiss banks still have plenty going for them. They can thank the Swiss franc for that. It's a safe-haven currency -- and that makes their banks safe havens too. The Swiss are famous for their fiscal prudence and low inflation, which makes their currency particularly strong. That's even more true now thanks to the euro crisis. Demand for Swiss francs is so great that the Swiss National Bank had to cap the value of their currency last year. It was getting so expensive that it threatened to push the Swiss economy into deflation.
The Romney camp has hinted that he only had a Swiss bank account because he wanted Swiss francs. In other words, he was hedging against the dollar declining in value. That's fair, even if it's a bit odd for someone with $250 million. But you don't need a Swiss bank account to get Swiss francs. You can just buy Swiss francs.
Another possibility is that Romney had the Swiss bank account to make it easier to wire money from one European investment to another. We can't say without seeing more tax returns. All we do know is his lawyer closed this Swiss bank account in 2010.
That's the final point. Mitt Romney's long-time lawyer, R. Bradford Malt, has managed Romney's personal finances since Romney was elected governor of Massachusetts. That's when Romney set up a blind trust, to avoid any possible conflicts of interest. Still, there are questions about just how blind the trust has been. And, besides, Romney is ultimately responsible for his own money.
Question #3: Is it fair for the Obama campaign to go after the Swiss bank account?
When most people hear the words "Swiss bank account" they think "tax evasion". That's not always fair. There are plenty of good reasons an American might have a Swiss bank account. Maybe they live abroad. Or work for a Swiss company. But those are good reasons that don't apply to Mitt Romney. He didn't live abroad. And he didn't work for a Swiss company.
That doesn't mean Mitt Romney was up to no good. There's no evidence of that. It's entirely possible that Romney really was just hedging against the dollar. That's the legitimate reason a very wealthy person would want a Swiss bank account. The not-so-legitimate reason is the secrecy -- to hide money from the IRS. It's unfair for the Obama campaign to insinuate Romney was doing the latter. But it'd be a lot more unfair if Romney was more transparent. We just don't know enough to say anything definitively. We don't know how long the account existed. We don't know whether Romney's lawyer or Romney himself set it up.
What we do know is that this kind of stuff doesn't seem weird to Romney. It's what the über-wealthy do. But it is weird to most everyone else. It's not what the 99 percent do. Actually, we know one more thing. Romney can end this controversy whenever he wants. He just has to release more tax records. He's running for office for Pete's sake. He should say something.
In other words, Romney should take a page from the Swiss. Even they're less secretive nowadays.
The social network learns more about its users than they might realize.
Facebook, you may have noticed, turned into a rainbow-drenched spectacle following the Supreme Court’s decision Friday that same-sex marriage is a Constitutional right.
By overlaying their profile photos with a rainbow filter, Facebook users began celebrating in a way we haven't seen since March 2013, when 3 million peoplechanged their profile images to a red equals sign—the logo of the Human Rights Campaign—as a way to support marriage equality. This time, Facebook provided a simple way to turn profile photos rainbow-colored. More than 1 million people changed their profile in the first few hours, according to the Facebook spokesperson William Nevius, and the number continues to grow.
“This is probably a Facebook experiment!” joked the MIT network scientist Cesar Hidalgo on Facebook yesterday. “This is one Facebook study I want to be included in!” wrote Stacy Blasiola, a communications Ph.D. candidate at the University of Illinois, when she changed her profile.
People labeled “smart” at a young age don’t deal well with being wrong. Life grows stagnant.
ASPEN, Colo.—At whatever agesmart people develop the idea that they are smart, they also tend to develop vulnerability around relinquishing that label. So the difference between telling a kid “You did a great job” and “You are smart” isn’t subtle. That is, at least, according to one growing movement in education and parenting that advocates for retirement of “the S word.”
The idea is that when we praise kids for being smart, those kids think: Oh good, I'm smart. And then later, when those kids mess up, which they will, they think: Oh no, I'm not smart after all. People will think I’m not smart after all. And that’s the worst. That’s a risk to avoid, they learn.“Smart” kids stand to become especially averse to making mistakes, which are critical to learning and succeeding.
Tuesday is the official deadline for the Greek government to either make a deal with debtors or face default and its consequences.
Greece is now under two hours from falling into “arrears,” unless the IMF agrees to give them more time. This morning, Greece’s finance minister Yanis Varoufakis confirmed that the owed payment would not be coming today. Falling into arrears means that Greece will no longer be eligible for IMF aid. It will be the first advanced economy to fall into arrears with the IMF in its history.
Some say it’s just semantics, because the inability to pay back a loan is generally known as a “default.” But according to Bloomberg: “IMF Managing Director Christine Lagarde said on June 18 that she’d consider Greece in ‘default,’ spokesman Gerry Rice said last week that the fund wouldn’t use the term in official communication and would instead refer to Greece being in ‘arrears.’”
Over the last two weeks, Republican presidential candidates have repeatedly missed opportunities to demonstrate that they care about communities outside of their traditional base.
After Mitt Romney’s defeat in 2012, the Republican National Committee published an “autopsy.” “When it comes to social issues,” the autopsy declared, “the Party must in fact and deed be inclusive and welcoming. If we are not, we will limit our ability to attract young people.” The autopsy also added that, “we need to go to communities where Republicans do not normally go to listen and make our case. We need to campaign among Hispanic, black, Asian, and gay Americans and demonstrate we care about them, too.”
The last two weeks, more than any since Romney’s defeat, illustrate how miserably the GOP has failed.
Start with June 17, when Dylann Roof, a young white man enamored of the Confederate flag, murdered nine African Americans in church. Within three days, Romney had called for the Confederate flag’s removal from South Carolina’s capitol. Four days later, the state’s Republican governor and senators called for its removal too. But during that entire week—even as it became obvious that the politics of the flag were shifting—not a single GOP presidential candidate forthrightly called for it to be taken down. Instead, they mostly called it a state decision, a transparent dodge politicians deploy when they don’t want to make a difficult call.
The second episode of the new season was a slow burner with a dramatic twist.
Let’s start at the beginning, with Frank in bed with his wife, Jordan, discussing water stains on the ceiling and childhood entombments. I don’t know about you guys, but I found this whole bit slack and familiar. Maybe there was a two-minute scene in there, but five? Maybe a more charismatic actor could have pulled off that lengthy monologue. But Vince Vaughn is no Robert Shaw, and his childhood basement is no U.S.S. Indianapolis.
For centuries, experts have predicted that machines would make workers obsolete. That moment may finally be arriving. Could that be a good thing?
1. Youngstown, U.S.A.
The end of work is still just a futuristic concept for most of the United States, but it is something like a moment in history for Youngstown, Ohio, one its residents can cite with precision: September 19, 1977.
For much of the 20th century, Youngstown’s steel mills delivered such great prosperity that the city was a model of the American dream, boasting a median income and a homeownership rate that were among the nation’s highest. But as manufacturing shifted abroad after World War II, Youngstown steel suffered, and on that gray September afternoon in 1977, Youngstown Sheet and Tube announced the shuttering of its Campbell Works mill. Within five years, the city lost 50,000 jobs and $1.3 billion in manufacturing wages. The effect was so severe that a term was coined to describe the fallout: regional depression.
The power in the president’s eulogy for Clementa Pinckney came not from his singing, but from the silence that preceded it.
Coverage of the memorial service held for Reverend Clementa Pinckney in Charleston last week focused largely on the surprising moment when the leader of the free world broke into song. That song, of course, was “Amazing Grace” and the president sang it distinctly in the style of the black church.
For all the attention Obama’s unexpected performance received, though, it’s worth taking another look at the “Amazing Grace” clip, this time watching for the silence. His singing seems to be a release of the collective tension that had been building for a week after the Emanuel A.M.E. shooting. But the preceding pause seems to hold its hearers captive. Though he is frequently interrupted with cheers and amens throughout his eulogy for Reverend Pinckney, the pause he takes 35 minutes into the speech is easily the longest break from the text before him.
New Jersey Governor Chris Christie was once seen as a frontrunner. As he starts off his campaign now, he’s near the back of the pack.
Did Chris Christie already miss his chance to be president? Back in 2012, the New Jersey governor was wildly popular at home, Republicans were clamoring for him to enter the presidential race, and donors were lined up to write checks.
When he jumped into the race Tuesday, he did so as a beleaguered insurgent. He’s among the last entrants to a crowded field, he has much ground to cover in fundraising, and his political fortunes are in tatters. Just three in 10 New Jerseyans approve of his handling of his job, and Christie’s favorability is deeply underwater among Republican primary voters.
Clearly, it’s been a rough three years for Christie. One might peg the start as Christie’s speech at the 2012 Republican National Convention, panned by party insiders as self-serving; or perhaps it was his embrace of President Obama on an airstrip after Hurricane Sandy. Then there was “Bridgegate,” the controversy over lane closures on the George Washington Bridge. While Christie himself has escaped legal trouble so far, two former top aides have been charged with crimes and a third has pled guilty. The scandal is particularly damaging for Christie, who says he was unaware of the apparently politically punitive closures, since his case for office rests on credibility and competence. While it’s gotten less national attention, Christie’s stateside struggles have a lot to do with the Garden State economy. Atlantic City is shutting down. (Maybe everything that dies someday comes back, but not soon enough for Christie’s campaign.) The state’s debt rating has been cut nine times during the Christie governorship. A judge also ruled that a Christie plan to cut pension payments was illegal.
The historian and Knesset member Michael Oren accuses the president of distancing the U.S. from Israel, and calls out left-wing Jews and Israel’s Jewish critics in the American press.
In a recent post, I suggested that the intervention of two men, the former U.S. national security advisor Tom Donilon and the former Israeli ambassador to the United States, Michael Oren, might help improve the dysfunctional relationship between the Obama administration and the government of Israeli Prime Minister Benjamin Netanyahu.
At the time I wrote this, both men had reputations as people who were concerned about preserving the extraordinarily complicated, and extraordinarily close, U.S.-Israel relationship, and both had spent a good deal of time calming the waters between Obama and Netanyahu. Today, Donilon maintains that reputation. As for Oren …
Put it this way: If Goldblog readers would allow me to withdraw the suggestion, I’d be much obliged. Oren has created a new role for himself: acid critic of the Obama administration and of left-leaning American Jews (especially in the press and in the White House) who, he believes, are trading on their Jewishness when they criticize Israel. Oren’s critique, at its heart, is simple: Obama, in part because he wanted to reconcile the U.S. with the “Muslim world” (a very large, ill-defined, and politically complicated concept, in Oren’s mind), decided to distance the United States from Israel; to surprise Israel by altering U.S. Middle East policy without prior notice; and to negotiate with Israel’s most potent enemy without alerting Israeli leaders.
The question is at the center of the Greek crisis.
In 1961, the economist Robert Mundell published a paper laying out, per the title, “A Theory of Optimum Currency Areas.” In it, he inquired about the appropriate geographic extent of a shared unit of money. Was it the world? A country? Part of a country? A border-spanning region of, say, the western parts of the United States and Canada, with a separate currency circulating in the eastern parts of the two countries?
“It might seem at first that the question is purely academic,” he wrote, “since it hardly seems within the realm of political feasibility that national currencies would ever be abandoned in favor of any other arrangement.” But it was worth considering anyway, in part because “certain parts of the world are undergoing processes of economic integration and disintegration,” and an idea of what an “optimum currency area” would look like could help “clarify the meaning of these experiments.”