It’s a truism that in a scandal it is almost never the first revelation that sinks the protagonist. Rather, the secondary and tertiary revelations do the most damage. That pattern seems to be playing out with precision in the case of Philip Hildebrand, the head of Switzerland’s central bank.
His wife, a former currency trader herself who now runs an art gallery, thought the US dollar was “almost ridiculously cheap” and purchased $500,000 USD in August 2011. Her observation was well-founded: in August, the USD was trading at a record low to the Swiss franc. In September, she converted the funds back into Swiss francs after her husband introduced a minimum exchange for the franc. Her total profit was 61,000 francs or about $65,000 USD.
To give you a sense of the impact of Philipp Hildebrand’s monetary policy on the dollar/franc exchange rate, take a look at this chart:
Photo: Google finance
So she was right, the dollar has rallied versus the franc. But look at the spike after September 6, when her husband announced a minimum exchange of 1.20 francs to the euro.
Despite the salmonella-esque feeling this gives you, her actions were totally permissible, per a statement from the Swiss National Bank (available on the SNB site in French and German only).
PriceWaterhouseCoopers was also brought in to conduct an investigation and announced on December 23 that the trades were within the bank’s guidelines. The Swiss Government investigated and came to a similar conclusion.
So Hildebrand is in the clear, right?
Far from it. As more and more questions are asked, the scandal is now widening to include a Swiss bank, communication between the couple about the trade and even details of the Hilderbrands’ personal finances.
Via Wall Street Journal, a Swiss paper is now reporting that Philipp Hildebrand told his wife to execute the trade, rather than her executing it based on her own view. A central bank chief conspiring with his spouse to personally profit from his own monetary policy? Guaranteed resignation at a minimum.
Also coming into the fore are Swiss banking regulations, with their focus on confidentiality and strong penalties for those who disclose client information in almost any form. The employee who leaked details of the Hildbrands’ transactions has turned himself into police and looks unlikely to be able to claim anything resembling whistleblower status.
Adding to the drama is who the details were leaked to: the 71 year-old billionaire head of a populist party who called from Hildebrand’s resignation in 2010. Potentially damaging personal financial information in the hands of a fierce political opponent? Not pretty.
The final layer, at least for now: the same institution where the Hildebrand’s were clients, Bank Sarasin, has been hit with an insider trading charge by another client for its involvement in the trades.
Cleared of the initial claim against him and his wife, Philipp Hildebrand could see his career and reputation undone as these additional accusations develop.