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Euro Pacific Capital CEO Peter Schiff on how government regulations are hurting banks’ business with overseas clients.
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Some -- -- its oversight needed -- days my next guest says all the regulations are costing financial services companies eight ton of money and lots business specifically overseas.
And you won't believe what.
He was told.
When it comes to dealing with international customers Peter -- is the CEO of -- Pacific capital.
An author of a new book the real crash it is great to have you back on the show and I just -- -- tell our audience that one of the reasons why you and I are talking about this tonight.
Is because Bank of America of course sold its private banking arm to another -- overseas and this caught your attention.
Because you're in that you -- in a similar situation tells about that.
Well sure first of all the important part of this story is what motivated Merrill Lynch to sell in the first place.
And if you go back to the news reports when they first announced that they were looking for a buyer.
Merrill said that it was no longer viable to be in this line of business because it was too risky.
And the risks were regulatory.
For compliance cost and for fines related to.
And -- money laundering laws Merrill Lynch wanted to.
Tapping into the growing wealth of the emerging markets they wanted to shot at managing the fortunes of the entrepreneurs in emerging markets and now because of US security regulators.
They can't do it.
And of course that diminishes employment opportunities here in America and I know about this because I went through the same thing.
-- in a routine audit of my firm a couple years ago I had a conversation -- one of the regulators and he asked me point blank -- -- I think it's suspicious.
That's somebody in Australia.
Would open up a brokerage account with my firm.
Rather than open one up and Australia.
And I said no I don't I just think it means I've got a good product and I'm waiting.
This global battle as we compete for customers I think it's a victory.
But the regulator told me no it is very suspicious it could be indicative of potential money laundering.
And as a result all of these overseas accounts.
Have to have special scrutiny it cost a lot more money to open and maintain these accounts and quite frankly the foreign customers.
Didn't like to jump through all the cool it's that the US regulators had -- -- -- and shortly we gave -- uncompetitive and I shut down.
My overseas businesses well and I -- -- -- brought I actually set up a separate brokerage firm in the Craig.
-- -- but he handled the whole zoo that you have for basically have to treat anyone it is important customer as if they could be a terrorist -- people watching out there in the audience would say.
You know number one we've seen a lot of scandals where we've seen -- money laundered through banks are firms that had a branch here in the US.
So it seems almost reasonable that they would put this sort of burden on you and number two they say.
All rich broker bank guy at a really care that -- being regulated like -- how does this impact -- so tell me the answer those questions.
Yet what ladies first well it's not reasonable at all and -- all of this anti money laundering.
Came about as a result of the ninth September 11 terrorist attack -- supposedly.
It's all there to track down terrorists will.
My clients aren't terrorists somebody opening up an account with me.
You know from Australia because they they wanna do business with me they're not a terrorist the odds that they are terrorists is -- -- The regulator no I mean they're -- to protect us they're supposed to and not you know be preventing people from laundering money through the US have a -- of how do you know that.
Well look the bottom line is for a book.
Even if they were terrorist.
If they didn't send their money to me it's gonna go someplace in the back if they just put -- -- gold they're gonna -- most most money managers.
But that they -- the fact of the matter is they're not terrorists but they're not talking about terrorism -- just talking about money laundering.
But you know it's not money laundering how many people in Australia are are laundering money.
I mean the reason that odd that I -- that I'm getting their businesses because I'm able to appeal and that's what Merrill Lynch was doing they were able to use their expertise to try to win -- Business spending one million as saying we don't want I want her money is gonna go to somebody who invented and and send my money to you from Australia Bennett if you're saying your money -- -- let's get back to why this is really important now.
You're saying this is costing America jobs right how is that the case.
Well.
In my case instead of somebody from Australia sending their money to me in America I now have them send it to me in a foreign country.
And so now I create jobs and revenues offshore.
That would have been created here and in Merrill Lynch obviously -- bigger example.
If Merrill Lynch can no longer compete on a level playing field.
For asset management business in emerging markets where's the growth gonna come from you know Americans are are are losing -- we're we're mired in this recession you've got other parts the world that are creating wealth why can't our.
Financial services businesses compete on eleven playing field to get a share of that growing business we can't do that anymore Merrill -- basically had to throw in the towel.
And sell off this business and I would have preferred.
To we have grown mile offshore business from America great -- in America in the process but the regulators made that too expensive so why wanna -- foreign business the regulators really left me no choice but to do was go RCL leadership hi I'm Tyler thanks so much for profit until I get really all of this -- unintended consequences.
Peter thank you so much we appreciate your.
