Why overseas investors may want to avoid US brokerages and financial institutions -
Not confiscation or bankruptcy, but
1. More red tape - part of "know your custormer". More forms, funds possibly held up, etc.
We can expect more of this worldwide - some places worse than others.
2. More and higher witholding taxes.
3. Possibilities of account freezes while "X" is investigated.
X being some broad categorical dragnet, like all Irish surnamed account holders with GSM phones who have traveled to South America in the past year. Every account which ends in the numbers "37".
That's effective confiscation for as long as it lasts, which could be months.
4. Less likley - restrictions on currency conversion in /out of USD.
I don't consider bankruptcy of financial firms likely after Refco. GM, maybe, but not Citibank. Even if bird flu spreads, the US Dollar drops, and there are more Hurricanes.
Far too many regulators, bank officials, traders, etc. are worried about this, various hedges, firebreaks, and contingency plans in place. Fannie and Freddie are being cleaned up, high risk mortgages packaged and sold to Europe, and derivative books balanced, backed up by various central banks willingness to intervene early.
Longer term, there could be more risk associated with the new Basel II bank capital requirements as banks compete and learn to abuse the regulations, and excesses in credit default obligations.
Five years from now we could see another Nick Leeson (guy who hid losing trades and crashed Barings Bank) but not this year, still too many people watching. |
