From Enron to Wall Street, a big cause of America’s major financial collapses in the past decade has been simple deceit. Finaglers used secret offshore accounts and dummy subsidiaries in the Cayman Islands and elsewhere to avoid regulatory scrutiny and to make investors think the businesses were sounder than they really were.
The good news is that Aetna, AIG, MetLife and other giants have now moved away from such offshore hideouts. The bad news, however, is that they have not actually moved away from the shady practice of hiding their finances from regulators and investors — they just don’t have to do it offshore these days. This is because Vermont, Delaware, South Carolina, Utah and other states have turned themselves into onshore havens for concealing the finances of insurance corporations.
Why would states be part of this hustle? Money. In exchange for limp-wristed regulations, they collect taxes and fees from the corporations. But each new state entering this game offers lower taxes to entice captives to locate there, thus compelling all states to shrink their take to stay in the game.
The real captives, as usual, are the consumers who’ll end up getting shtooked by the deceit and us taxpayers who’ll be asked to bail out the deceivers. It’s a losing game.
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