November 23, 2020

Now Is the Time for All Good Bankers to Bash the Caymans

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Y1XCBy Jonathan Weil Bloomberg

A brief follow-up to my column today on Jack Lew, President Barack Obama’s nominee to lead the Treasury Department: One of the subjects Lew took heat over during his Senate confirmation hearing last week was his investment in a Citigroup fund located in a Cayman Islands building known as a home for offshore tax havens.

As Bloomberg News has reported, Ugland House is a five-story office building on South Church Street in the Caymans. It served as the official address for 18,857 corporations as of March 2008, according to a U.S. Government Accountability Office study published that year. About half of those companies had U.S. billing addresses.

Senator Charles Grassley, who sits on the Senate Finance Committee, has been making a stink about all of this. The Iowa Republican this week released Lew’s responses to written questions he had asked for the record. Some of them focused on Caymans-related matters dating to the days when Lew was a Citigroup executive. The Q&A isn’t all that revealing, but it is occasionally funny.

For instance, Grassley asked Lew if he was “aware of any of Citigroup’s Cayman subsidiaries,” noting that Citigroup had 121 of them. Grassley also asked: “Did you at any point in your tenure at Citigroup raise opposition to the use of Cayman Islands-based corporations in transacting company business? If so, when and how?”

Lew replied that he had no role in creating investment funds or deciding where they were located. “I do not recall being aware of any particular Citigroup subsidiaries located in the Cayman Islands,” Lew said.

That got me thinking: Can you imagine the reaction Lew would have gotten from his fellow executives at Citigroup if one day out of the blue he got all high-minded and starting objecting to the bank’s use of Cayman Islands companies? He probably would have been laughed out of the building.

It would be like asking a senator if he or she ever objected to the practice of taking campaign donations from rich people who hoped to get something in return. Wonder what the answer would be.

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