How Strange a Bank Was It?
Notes on "Meltdown: Greed, Scandal, and the Collapse of Credit Suisse," by Duncan Mavin
However admirable the Swiss system of government may be, the joke about its role in the global economic system is it’s where French, Germans, and Italians go to commit crimes together.
Credit Suisse was at one time one of the big investment banks, but by far the weirdest. It went under after the collapse of Silicon Valley Bank and was bought by UBS under pressure from Swiss regulators. This postmortem, by a former managing editor for Barrons, is the rest of the story. The book is out in early March.
In the Obama years there was real friction between U.S. authorities and both the bank and Swiss authorities, but thereafter there were a number of specific cases in which the Swiss pursued criminal prosecutions of people who held accounts there, like the one of Bulgarian cocaine kingpin Evelin Banev. And it must be said, FINMA’s decision, with the bank facing collapse, to tell executives, we’re going to wind you down or you can be sold to UBS, was pretty gutsy and probably protected their national interest. On the other hand, who knows what the world might have found out if it collapsed and was sold for parts.
That is to say, if there’s something strange about the story here, it’s not simply the fact of shady and secretive bank accounts, as is the reputation of Swiss banking. To be sure, there’s plenty of that, odd accounts as detailed in the Suisse Secrets leak reported on by the OCCRP, but the big story is how the bank is implicated in nearly all the big financial scandals in recent years: Wirecard, SVB, Greensill, Luckin Coffee, Najib Razak, Archegos. It was Credit Suisse that was involved in structuring the last-minute $1 billion loan from SoftBank to Wirecard right before it blew up, for which Christian Angermayer got paid a “success fee.”
In the last chapter, Mavin quotes Sergio Ermotti, CEO of UBS, saying “first and foremost, Credit Suisse was an entirely idiosyncratic banking failure.” That’s probably right.
You almost get the sense of Credit Suisse as the last libertarians, pursuing profit while all the other smart financial players have learned to align profit opportunities with what is considered desirable by various nations. It’s a very German quality to not get the joke in this way.
If U.S. regulators were taking such a hostile posture toward the bank, it’s probably not tout court because secretive and shady banking is going on, the question is whose. Mavin begins his story with the banks origins, when first chairman Alfred Escher made himself sort of the Henry Clay of Switzerland. There have been many controversies over the years regarding the bank’s openness to holding accounts for Nazis and other fascists.
This is obviously a controversial matter, and the litigation by Jews to recover hidden or forgotten accounts is of course commendable. But as a strategic question, providing a third country through which to attempt to draw out the wealth of an adversary is, one could argue, defensible. We do it today with China. Edda Mussolini put her diary in a Credit Suisse deposit box, which was recovered by Allen Dulles for use in the Nuremberg Trials, for instance.
Nevertheless, the impression one gets of the bank is that, in more recent decades, it’s very German, they’re banking a lot of Russians with exposure to a major Russo-German accounting fraud, and the British are kind of OK with it. The country likely to have both strategic reasons to object, and bad blood, so to speak, is the French. Charles de Gaulle accused Credit Suisse of financing a putsch against him in the 1960s, in which Col. Louis Bloomfield, a lawyer for the Jewish mafia Bronfman family, played a key role.
The deal, which one gets the impression has existed until fairly recently when the U.S., and probably the French too, got fed up, is that a modicum of criminality would be permitted to exist in the Swiss banking system and we would keep an eye on it, and Credit Suisse was a vehicle. These cascading leaks and scandals are a sign that’s probably over. It’s pretty conspicuous that the bank’s rocky modern history seems to have its best period under the leadership of an American CEO from the Midwest, under whose auspices they managed to weather the financial crisis without a public bailout, though they received a big investment led by Qatar. During this period the bank pled guilty to helping Americans cheat on their taxes.
One way the Swiss processed this, Mavin writes, was to accuse the bank of abusing Swiss banking secrecy laws, thereby putting them at risk from the big bad United States. This is probably an accusation the U.S. is perfectly happy to have them make.
In the 1990s, Credit Suisse and CSFB, an American affiliate, were involved in some things of great relevance today. New York politicians were pursuing the Nazi bank accounts question, and one of the American bankers, Andy Stone, started lending heavily to Donald Trump—apparently, in many cases, with loans up to 95 percent of the value of a property. And then in the late 1990s, Credit Suisse has a bad time because, like many American financiers but “by far the largest of any Western institution,” it had gotten in on the post-communist Russian economy, which experienced its first economic crisis. It’s not until about ten years later that the relationship between Trump and Deutsche Bank, which was covered in the book Dark Towers and was a big subject at his fraud trial, really took off.
In the early 2000s, James Comey, as a prosecutor in the SDNY, accused Frank Quattrone, the man behind many of the IPOs in the early tech boom, of evidence destruction. Quattrone was famous at the time and there are books about him, and Mavin recounts a lot of that here.
The aspect of this likely to attract the interest of gossipy elites is the question of whether Tidjane Thiam, brought in after the American Bradley Dougan, was set up to fail, or whether he merely had the impossible job of saving the bank. The answer, of course, if it’s not a normal financial institution, is neither.
If I were an investor for the gulf states, I would be a little concerned with the way they were treated as a source of bailouts for Credit Suisse for many years. They weren’t exactly treated as partners in this, it was sort of something they had to do, until the Saudis declined to pay in anymore. They seem to have already begun to think through new ways to invest.
One’s eyes glaze over when trying to make sense of the various executive plans to restructure the bank, they are indistinguishable to a layman and at this level of generality. But it does seem to be the case that in many situations the executives neither knew, nor perhaps were able to know, the full scope of their business.
Mavin is a financial journalist and he covers these matters like one, and that makes for an exciting enough story in itself. That’s how one probably ought to cover the collapse of one of the world’s major investment banks. But the number of times the Credit Suisse name crops up in absolutely abnormal contexts ought to make us wonder whether that’s the best way to understand what’s going on.