Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-07T08:45:29.515Z Has data issue: false hasContentIssue false
  • English
  • Français

The long arm of justice: U.S. structural power and international banking

Published online by Cambridge University Press:  20 January 2017

Patrick Emmenegger
Get access Rights & Permissions [Opens in a new window]

Abstract

How much authority can sovereign states exercise over international banking in times of financial globalization? While most literature on international finance is rather pessimistic, this article argues that in case of US law enforcement, this pessimistic view is increasingly erroneous. The reason is that US authorities can take advantage of international banks’ structural dependence on access to the dollar-based financial system to force banks into punitive agreements or to plead guilty in case of criminal offenses. Using the conflict between the USA and Swiss banks over tax evasion by US persons, this article demonstrates that banks in the liberal economic system can no longer survive without access to the US-controlled, dollar-based financial system, thus giving the USA structural power over banks. In addition, it is shown that US structural power can be used strategically during negotiation processes to apply pressure on banks. Finally, while the use of this structural power was originally restricted to smaller banks, whose collapse would not endanger the world economy, US authorities have recently learnt to manage market expectations in a way that allows them to also target banks that were previously considered “too big to jail.”

Type
Research articles
Information
Business and Politics , Volume 17 , Issue 3: Special Issue: Structural Power and the Study of Business: Guest Editor: Pepper D. Culpepper , October 2015 , pp. 473 - 493
Copyright
Copyright © V.K. Aggarwal 2015 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Baker & McKenzie. 2000. Memorandum: Documentation Guidelines for Qualified Intermediaries – Accounts Holders Other than Individuals. Zurich: Baker & McKenzie.Google Scholar
BCG. 2013. Global Wealth 2013. Boston: The Boston Consulting Group.Google Scholar
Bell, Stephen. 2012. “The Power of Ideas: The Ideational Shaping of the Structural Power of Business.” International Studies Quarterly 56 (4): 661–673.Google Scholar
Block, Fred. 1977. “The Ruling Class Does Not Rule: Notes on the Marxist Theory of the State.” Socialist Revolution 33 (May–June): 6–28.Google Scholar
Bondi, Bradley J. 2010. “Don't Tread on Me: Has the United States Government's Quest for Customer Records from UBS Sounded the Death Knell for Swiss Bank Secrecy Laws?” Northwestern Journal of International Law & Business 30 (1): 1–21.Google Scholar
Cohen, Benjamin J. 2013. “Currency and State Power.” In Back to Basics: State Power in a Contemporary World, edited by Finnemore, Martha and Goldstein, Judith. Oxford: Oxford University Press.Google Scholar
Court of the Southern District of New York. 2012. United States of America v. WEGELIN & Co., Michael Berlinka, Urs Frei, and Roger Keller, Defendants. Indictment. Washington: Department of Justice.Google Scholar
Court of the Southern District of New York. 2013. United States of America v. WEGELIN & Co., et al.: Sentencing Memorandum of WEGELIN & Co. Washington: Department of Justice.Google Scholar
Culpepper, Pepper D., and Reinke, Raphael. 2014. “Structural Power and Bank Bailouts in the United Kingdom and the United States.” Politics & Society 42 (4): 427–454.CrossRefGoogle Scholar
Dahl, Robert A. 1961. Who Governs? Democracy and Power in an American City. New Haven: Yale University Press.Google Scholar
Drezner, Daniel W. 2007. All Politics is Global: Explaining International Regulatory Regimes. Princeton: Princeton University Press.Google Scholar
Emmenegger, Patrick. 2014. The Power to Dismiss: Trade Unions and the Regulation of Job Security in Western Europe. Oxford: Oxford University Press.Google Scholar
Emmenegger, Patrick and Eggenberger, Katrin. 2015. “State Sovereignty, Economic Interdependence, and US Extraterritoriality: The Demise of Swiss Banking Secrecy and the Re-Embedding of International Finance.” unpublished manuscript, University of St. Gallen.Google Scholar
Fairfield, Tasha. 2015. Private Wealth and Public Revenue in Latin America: Business Power and Tax Politics. New York: Cambridge University Press.CrossRefGoogle Scholar
Garrett, Brandon L. 2014. Too Big to Jail: How Prosecutors Compromise with Corporations. Cambridge: Harvard University Press.Google Scholar
Government Accountability Office. 2007. Tax Compliance: Qualified Intermediary Program Provides Some Assurance That Taxes on Foreign Investors Are Withheld and Reported, but Can Be Improved. Washington DC: U.S. Government Accountability Office.Google Scholar
GPK. 2010. Die Behörden unter dem Druck der Finanzkrise und der Herausgabe von UBS-Kundendaten an die USA: Bericht der Geschäftsprüfungskommissionen des Nationalrates und des Ständerates. Bern: Eidgenössisches Parlament.Google Scholar
Hacker, Jacob and Pierson, Paul. 2002. “Business Power and Social Policy: Employers and the Formation of the American Welfare State.” Politics & Society 30 (2): 277–325.Google Scholar
Hakelberg, Lukas. 2015. “The Power Politics of International Tax Co-operation: Luxembourg, Austria and the Automatic Exchange of Information.” Journal of European Public Policy 15 (3): 409–428.CrossRefGoogle Scholar
Hanrehan, Barbara and Shapiro, Alan. 1998. “Compete as a Qualifying Intermediary.” International Tax Review 9: 48–50.Google Scholar
Helleiner, Eric. 1994. States and the Reemergence of Global Finance: From Bretton Woods to the 1990s. Ithaca: Cornell University Press.Google Scholar
Hindmoor, Andrew and McGeechan, Josh. 2013. “Luck, Systematic Luck and Business Power: Lucky All the Way Down or Trying Hard to get What it Wants without Trying?” Political Studies 61 (4): 834–849.Google Scholar
Hirschman, Albert O. 1969. National Power and the Structure of Foreign Trade. Berkeley: University of California Press.Google Scholar
ISDA. 2002. Master Agreement. New York: International Swaps and Derivatives Association.Google Scholar
Krasner, Stephen D. 1976. “State Power and the Structure of International Trade.” World Politics 28 (3): 317–347.Google Scholar
Landmann, Valentin. 2013. Die verschwiegene Geiselnahme. Der Steuerkrieg der USA gegen die Schweiz. Zürich: Offizin.Google Scholar
Levin, Carl and Coleman, Norm. 2008. Tax Haven Banks and U.S. Tax Compliance. Staff Report of Permanent Subcommittee on Investigations. Washington DC: United States Senate.Google Scholar
Lindblom, Charles E. 1977. Politics and Markets: The World's Political-Economic System. New York: Basic Books.Google Scholar
Lindblom, Charles E. 1982. “The Market as Prison.” Journal of Politics 44 (2): 323–336.Google Scholar
McGill, Ross K. 2013. US Withholding Tax: Practical Implications of QI and FATCA. Basingstoke: Macmillan.Google Scholar
Morse, Susan C. 2012. “Ask for Help, Uncle Sam: The Future of Global Tax Reporting.” Villanova Law Review 57: 529–550.Google Scholar
Newman, Abraham and Posner, Elliot. 2011. “International Interdependence and Regulatory Power: Authority, Mobility, and Markets.” European Journal of International Relations 17 (4): 589–610.Google Scholar
Norrlof, Carla. 2014. “Dollar Hegemony: A Power Analysis.” Review of International Political Economy 21 (5): 1042–1070.Google Scholar
Palan, Ronen. 2002. “Tax Havens and the Commercialization of State Sovereignty.” International Organization 56 (1): 151–176.Google Scholar
Przeworski, Adam and Wallerstein, Michael. 1988. “Structural Dependence of the State on Capital.” American Political Science Review 82 (1): 11–29.Google Scholar
Schaub, Martin. 2011. “Konflikt um Kundendaten: Die Situation der UBS vor dem Abkommen 09.” Zeitschrift für Schweizerisches Recht 130: 209–238.Google Scholar
Smith, Martin J. 2000. Power and the State. Basingstoke: Palgrave Macmillan.Google Scholar
Strange, Susan. 1996. The Retreat of the State: The Diffusion of Power in the World Economy. Cambridge: Cambridge University Press.Google Scholar
Swiss Federal Court. 2011. Medienmitteilung des Bundesgerichts: Übergabe von Kundendaten der UBS durch die Finanzmarktaufsicht (FINMA) an das U.S.-Justizdepartement war rechtmässig. Lausanne: Bundesgericht.Google Scholar
Government, Swiss. 2012. Die Behörden unter dem Druck der Finanzkrise und der Herausgabe von UBS-Kundendaten an die USA. Bern: Schweizer Bundesrat.Google Scholar
U.S. Department of Justice and Swiss Federal Department of Finance. 2013. Joint Statement between the U.S. Department of Justice and the Swiss Federal Department of Finance.Google Scholar
Vogel, David. 1987. “Political Science and the Study of Corporate Power: A Dissent from the New Conventional Wisdom.” British Journal of Political Science 17 (4): 385–408.Google Scholar
Winecoff, William Kindred. 2015. “Polluting Industries as Climate Protagonists: Cap and Trade and the Problem of Business Preferences.” Business and Politics. Forthcoming.Google Scholar
Winters, Jeffrey. 1996. Power in Motion. Ithaca: Cornell University Press.Google Scholar