Think of Swiss bank accounts, and what likely comes to mind are the shady dealings of international criminals, secret agents and tax dodgers. But is that image more fiction than fact?
On Monday, Mitt Romney's Swiss bank account came back into the limelight when Sen. Dick Durbin (D- Ill.) publicly noted that no presidential hopeful has ever had a portfolio like Romney's, and that Romney is most likely the first to possess a bank account in the famously secretive financial haven.
So are we to infer that Candidate Bland might have a secret lair somewhere? (Whether you picture it equipped with Q-invented good-guy gadgets and a dry martini, or host to a super-villain's requisite Persian cat and horde of henchmen is, of course, up to you.)
Not exactly. In fact, that Swiss account only means he's part of a trend: Their use is on the uptick for Americans as they try to protect their assets amidst the shaky economy.
'Plenty of Good Banks in the United States'
That's not to say holding a foreign account is politically wise: It's essentially a triple blemish for a candidate. First, a Swiss account appears to be a clear sign of distrust in the American banking system and value of the dollar; second, it leads to speculation about what assets he might be hiding. (Not to mention the fact that Romney has been accused of skimping on his taxes by holding funds overseas -- already a touchy subject for the wealthy ex-governor, who has only disclosed his last two tax returns.) And third, to Middle America, it could make him appear even more out of touch.
The account has become an easy target for Democrats, with Durbin pointing out billionaire Warren Buffet's expressed reason for never opening a Swiss bank account: "There are plenty of good banks in the United States."
"So I started asking people why [would] you have a Swiss bank account?" Durbin said. "There are two reasonable explanations. Number one, you believe the Swiss franc is a stronger currency than the United States' dollar, and that apparently is the decision the Romney family made during the Bush presidency. And secondly, you want to conceal something, you want to hide something."
But Romney is not alone in moving assets to Switzerland, and like many other holders of those accounts, there's no inherent reason to assume he's involved in anything questionable.
The Myth of the Swiss Bank Account
Swiss bank accounts aren't just for criminals trying to hide their monetary tracks. They're also popular among people in countries with unstable banks, monetary policies or governments, because they provide added privacy and security for assets.
Douglass S. Lodmell, partner and co-founder of Lodmell & Lodmell in Phoenix, is an expert in asset protection, and helps clients procure Swiss bank accounts. He dismisses the common conception of Swiss bank accounts as part of some hush-hush omerta system.
"There is the James Bond vision of Swiss bank accounts," Lodmell said. "People think there are numbered secret bank accounts, that when you open the account you get only a number."
That cinematic conception of espionage and illicit financial dealings is false, according to Lodmell.
"Those don't exist," he said. "A lot of that is the perception is that if you bank in Switzerland, you are trying to go under the radar or off the grid, that it means you're hiding something."
The IRS' Long Battle with Switzerland
Sen. Carl Levin (D-Mich) is one of the most outspoken critics of Romney's Swiss bank account, and is of the mind that having such an account is cause for raised eyebrows.
"I saw in the paper this morning that the spokesperson for the Romney campaign said that it was just an ordinary bank account in Switzerland," Levin said in January. "We went after UBS in my subcommittee, we have seen abuses by American wealthy folks trying to hide from Uncle Sam, putting their money in Swiss bank accounts and bank accounts in other tax havens. ... There is no such thing as an ordinary Swiss bank account."
But not so fast: In fact, there is transparency, Lodmell said. When opening a Swiss bank account, Americans have to file an FBAR form with the IRS that discloses the assets. Back when the "international man of mystery" concept of the Swiss bank account holder was born, that wasn't the case. These days, it's not such a good tax dodging device.
"There's no reason to believe that he pays even one cent less in tax," he said.
Why Would You Want a Swiss Bank Account?
The stability of U.S. financial system has certainly come under question in the years since the fall of Lehman Brothers and Bear Stearns.
"There's a valid point that the U.S. banking infrastructure is not as reliable," Lodmell said.
And the money you put in Swiss bank account -- except for those at UBS or Credit Swiss -- is in a privately held bank where the account holders' assets are completely segregated, and insulated from the troubles than might effect the American system.
Those banks also have a Tier 1 capital ratio -- and the proportion of capital on reserve is five times as high as it must be for U.S. banks. And as you might recall from the series of stress tests banks have had to undergo in recent years, those reserves are a core measure of a bank's financial strength from a regulator's perspective.
"Any sophisticated person interested in an asset protection plan should consider Swiss banking," Lodmell said. "The point is to remove the money from the U.S. system with an international asset protection trust ... whether you're a business owner, [an] employer in California where laws are particularly harsh, or a doctor who could be sued for malpractice."
"A lot of people use the nest egg approach," Lodmell said. "If [Romney] has a portion of his money over there, that's the most practical thing in the world. It's not a commentary on the U.S. system, so it's just smart business. I would not accuse him of being a traitor. He's a shrewd business man... it doesn't mean you don't believe in the U.S dollar or America."
As the economy stays in the tank and uncertainty over the U.S. economy grows, Swiss bank accounts become appealing.
"More people do want Swiss bank accounts," Lodmell said. "There's huge confusion about whether we're going to go into hyper inflation, deflation. The demand is big. I think it's going to get bigger if the market takes a nose dive -- there are going to be people questioning where they hold their money, and the banking institutional risk is going to be front and center. We're in the domino effect in what's going on in Europe. Our banking system is not indomitable."
All that worry has resulted in a lot more money being moved Geneva-ward. In fact, since 2008 when the recession kicked into high gear, Lodmell & Lodmell has seen Swiss bank accounts being opened five times more rapidly than before.
That's a remarkable number considering the fact that it has become much harder to open a private Swiss bank account since the U.S. government's push against UBS two years ago to try to nab tax evaders.
With the outlook for various world currencies as uncertain as it is, the stability of the Swiss franc is another reason people are gravitating toward Swiss banks. And Swiss bank account assets can be held in 22 different currencies, giving depositors a way to participate in the foreign exchange game, for example, holding some assets held in yen and the rest in dollars.
Switzerland doesn't have major government debt. It's a small country, with a government that doesn't spend more than it has and takes a conservative approach to its overall finances. Its gold reserves help to stabilize the economy and have historically helped to protect the Swiss franc against inflation.
And there's no reason to think that Romney's Swiss account is anything more than that: a bit of extra asset protection in an uncertain financial world.