The Cutting Edge   September 2011
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  • 1. Nason & Nason September 15, 2011 Nason Temp SolutionsTuning out the StaticWe are a tired nation. Everyone is worn out and frustrated and it shows.It is very easy to get caught up in the negative vibrations echoing through the financialsectors and in the political arenas as well. We will soon be bombarded with several billiondollars of negative political ads, with more money spent than the economies of most of theeconomies of the world, pointing out how every incumbent politician is incompetent, corrupt,and selfish and is having an affair with someone. Although this is probably true, it is hard tobe positive and we do have some problems to resolve. Negative economic news, and soonads, makes a difficult situation seem worse and somehow we will muddle through as thereare some bright spots as well.The US economy is a giant engine and even with minimal 1% to 3 % growth it can pull a lotof cars with it. The banking system is much more heavily capitalized now than at thebeginning of the crisis and slowly digesting the forced mergers and problem loans. Thisincludes the European banks, especially the UK banks, and they are beginning to pulltogether to resolve the Euro problem. It will be resolved because it has to and there is toomuch at stake to not to. Estimates are that it will cost six times as much to unravel thesystem as to bail it out. What we are becoming increasingly aware of is how much thesystem is interdependent. Furthermore the speed and availability of information and tradingitself exacerbates the reactions and swings in the markets. They can move up almost asquickly as they move down. Yet in spite of the downgrading of the US risk, it is the bestthere is and the world still depends on the US to lead the way. Nobody is looking to Chinato solve the world’s financial crisis although they could help.It is good news that the US government is recognizing it has an employment problem and istaking steps to address it. In banking, it is also promising to see that there is progress beingmade in resolving the capital and longevity issues of the community and regional banks.Being taken over or merged has not been as disastrous as forecast and the correspondinglayoffs have somewhat been absorbed by the greater system. Yes, some of the larger
  • 2. banks have indicated they were cutting back on staffs but most of this is over time and a lotcan happen between now and then. So on a whole, things have gotten bad enough thatsides are talking and maybe the slide has stopped and the good news is that we will haveless bad news. Leave a comment on this article.NRA Accounts – International Banking’s Last StandNo legal issue is more important to community banking in Florida than the NRA (NonResident Aliens) accounts issue. Spurred on by Senator Carl Levin, who sees a tax cheatunder every stone, there is an attack on the NRA accounts as he believes they are a shieldfor millions, and even billions, of tax dollars seeking to slip under the radar as US tax cheatsmasquerade as foreigners. Besides, many in Congress believe people everywhere shouldpay their fair share of taxes no matter where they are from and that the US banking systemshould not be used to evade their tax responsibility. NRA information will give the US amoral force and vehicle to request similar information from foreign governments and assistwith FATCA enforcement. Levin has lots of converts and besides Florida only Texas feelsstrongly that the privacy of accounts needs to be protected. The irony of the requirement ofthe IRS that regulators are seeking to impose is that the persons being reported as accountholders are not subject to US taxation as a result of passive income. They owe no money.To put their names on a list that can be submitted for foreign tax authorities and in facttraded to those authorities make investors nervous that the information can be misused.The US has long been considered a safe haven for investors seeking country riskdiversification and stability. Now it is losing its attraction to many trying to escape corruptand oppressive governments such as Cuba and Venezuela. When all of the cost and lostincome is added up the dollar amount gained in tax levies is certainly a fraction of the costof the heavy reporting burden placed making US banks the tax policemen of the world.The ruling that will soon be enforced is that banks will be required to report to the IRS allnon resident alien accounts by country to the IRS and that information can be shared withthe government of the country of origin. Such accounts can represent as much as 60 or 70% of the deposit base of some banks and is used for people who wish to have a businessor presence in the US and who spend billions of dollars on an annual basis here. To chasethem away will have a detrimental effect on the liquidity and lending capacity of the hostbanks many of which are in Florida, Texas or California as most of the depositors areLatins. Every dollar on deposit produces nine dollars in lending. A bill introduced inCongress by Senator Marco Rubio and sponsored by Representative Bill Posey in theHouse has a decent chance of passage. They are getting little help from their friends as it isnot an issue of importance in other states and for them, tax cheats are tax cheats. Inaddition the big five banks are not complaining as they have their own problems and theyhave bigger fish to fry. Thus they are not pressuring the legislature. The bill, if passed, mayslow the progress of implementation of the IRS ruling by introducing a one sentence bill thatcommands that the Treasury shall not require information reporting of interest not effectivelyconnected to a US trade or business paid to a non resident alien on a deposit maintained ata US office. The bill has been endorsed by several bank lobbies and has a chance to pass.It is a last stance for international banking in this country as a safe and welcome place for aforeigner to do business. When we look back a few years from now and wonder why wehave lost so many jobs, maybe we will remember killing the goose that laid the golden egg.
  • 3. To some extent the damage has already been done. There is a sign at the border that saysforeigners not welcome. Four trillion dollars of foreigner’s deposits are at risk. Many of thelarger accounts and money are pouring out of the US. FATCA legislation is getting closer toimplementation where not only US banks but all banks with an office in the US are beingrequired to provide lists and real time activity of accounts of Americans around the world.By the way, the IRS definition includes not only individuals but any company or trust thathave 10 percent of more beneficial ownership by a US Citizen as a citizen for tax purposes.The IRS has taken the banking system hostage to the point where Swiss banks areprohibiting their wealth management people or senior officers from traveling to the US evento take a vacation or change planes. Further they will not approve the work visa of anAmerican to work for a Swiss bank in Switzerland. Frankly the Swiss like most of Europeare laughing at us and appalled we would cede the one area where the US had acompetitive advantage and lead on the rest of the world. Over-regulation, this among it, haseaten into the leadership the US had in the financial world and it has become a hostileplace to do business or travel to as a foreigner. Leave a comment on this articlePanama on the RiseThere are about 50 direct flights a week between Panama and Brazil on Copa Airline alone.Cruisers take cruise ships out of Panama because they cannot get visas to go to Miami orFt. Lauderdale without a hassle. The same is true for changing planes to go to Europe. Oneowning an apartment must keep impeccable records of their, or even their spouses, daysspent in the US to avoid US taxes on their world wide income. Venezuelan and other LatinAmericans are finding a warm welcome in Panama. Their financial business as well.Thanks to foresight and infrastructure Panama stands ready to pick up the US rejects.Panama’s banking center continues to grow. The financial hub grew at an estimated 12% in2010 with consolidated assets totaling $71 billion. Net bank revenues were $1.7 billion up$150 million more than 2009. Panama’s economy itself grew 7% in 2010. That is growthequivalent to China’s GDP increase. It makes Panama one of the countries of the regionleast affected by the global financial crisis. Panama banks are solvent with over 65% assetliquidity and account for 11% of Panama’s GDP. The International Banking Center hostssome 80 banking institutions and 16,000 people. Its dollar based economy helps, as doesits supervision and increasing array of financial services.Most would agree Donald Trump is not investing his money in real estate in Panama onwhim. Is there a real estate bubble? Most buildings and projects have 40 % equity and thusstaying power. New hotels are being built and even airports. The increase in the canal isPanama’s own stimulus package. Lots of energy, building, including a new metro system,hotels, mining and jobs being created. Yes, there is a traffic problem – but doesn’t everygrowing city in the world have one. Energy, education and health further head the list ofproblems. Welcome to the developed world. Not all is rosy on the political front aspoliticians jockey for position. Taking all things into account, Panama is not Miami but iswell along on its way to becoming the regions’ chief financial hub. Leave a comment on thisarticle
  • 4. On the MoveBBU has become Banesco USA, a name which is in line with that of the original bank andthe largest in Venezuela. Banesco has hired Domingo Callejas as SVP, Controller.Domingo was formerly SVP and Controller of US Century bank. Joining the Bank as well isDanny Rodriquez as EVP and Head of Regulatory Compliance. Danny was formerly atGibraltar. He replaced Alina Palacios who departed to BIV where she will head up theCompliance area. Danny in turn was replaced at Gibraltar by Maria T. Escoto who camefrom Biscayne Bank. Another Chief Compliance Officer making a move is ArleneVelazqueoni who has left Hapoalim and is now at Biscayne Bank. Wow, what aninterconnected market! Simon Cruz, who has been President of Bank of Coral Gables, willbe taking the helm as President of Intercredit Bank. Raul G. Valdes Fauli has assumedthe Presidency and CEO of Professional Bank; was formerly president of the SouthFlorida market of CNL Bank. J.C. Campuzano has been named Managing Director ofInternational Wealth Management at Northern Trust. Ricky Navarro has been named VPBusiness Banker at Bank United. He was formerly the Manager of SBA Lending atIntercredit Bank. He was replaced by Jeni Chokron who came from BankAtlantic.Roberto Diaz de Villegas has been engaged by Bank Julius Baer to serve as a Directorfor their Brazilian subsidiary and will head up their Nassau operations. David Davidoff hasjoined Nason & Nason as Senior Advisor. David had been HR Director at Coconut GroveBank. Leave a comment on this article.A lot going on. Feel free to make comments on our blog. Give us some suggestions ontopics you would like to see covered and let us know who else is on the move for our nextissue of .Contact us at main@nasonsearch.com www.NasonTemp.com | 95 Merrick Way | Coral Gables, FL | 33134 | (305) 476-1000 | | www.NasonSearch.com