Bankers Can Drop Anchor at Home

Washington lets offshore financiers set up shop in the U.S.

Global money flows freely, neatly skirting legal impediments of governments along the way and eventually arriving at its destination ready to do business. Some of the most successful repositories of this stateless money are the offshore branches of major U.S. banks in such out-of-the-way places as Bahrain in the Persian Gulf, the Bahamas and the Cayman Islands in the Caribbean. In all, more than $1 trillion is held by banks and borrowers outside the U.S. in offshore banking bases set up by American and foreign banks.

Since the banks are not on U.S....

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