“If you’re caught with an ounce of cocaine, the chances are good you’re going to go to jail. If it happens repeatedly you may go to jail for the rest of your life. But evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night.”

That’s Sen. Elizabeth Warren, who in a Senate Banking Committee hearing last Thursday grilled officials from the Treasury Department over why criminal charges were not filed against officials at HSBC who helped launder hundreds of millions of dollars for drug cartels.

Matt Taibbi provides the background:

For at least half a decade, the storied British colonial banking power helped to wash hundreds of millions of dollars for drug mobs, including Mexico’s Sinaloa drug cartel, suspected in tens of thousands of murders just in the past 10 years – people so totally evil, jokes former New York Attorney General Eliot Spitzer, that “they make the guys on Wall Street look good.” The bank also moved money for organizations linked to Al Qaeda and Hezbollah, and for Russian gangsters; helped countries like Iran, the Sudan and North Korea evade sanctions; and, in between helping murderers and terrorists and rogue states, aided countless common tax cheats in hiding their cash.

“They violated every goddamn law in the book,” says Jack Blum, an attorney and former Senate investigator who headed a major bribery investigation against Lockheed in the 1970s that led to the passage of the Foreign Corrupt Practices Act. “They took every imaginable form of illegal and illicit business.”

Taibbi also explains what’s unusual about the decision concerning HSBC:

That nobody from the bank went to jail or paid a dollar in individual fines is nothing new in this era of financial crisis. What is different about this settlement is that the Justice Department, for the first time, admitted why it decided to go soft on this particular kind of criminal. It was worried that anything more than a wrist slap for HSBC might undermine the world economy. “Had the U.S. authorities decided to press criminal charges,” said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, “HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized.”

It was the dawn of a new era. In the years just after 9/11, even being breathed on by a suspected terrorist could land you in extralegal detention for the rest of your life. But now, when you’re Too Big to Jail, you can cop to laundering terrorist cash and violating the Trading With the Enemy Act, and not only will you not be prosecuted for it, but the government will go out of its way to make sure you won’t lose your license. Some on the Hill put it to me this way: OK, fine, no jail time, but they can’t even pull their charter? Are you kidding?

But the Justice Department wasn’t finished handing out Christmas goodies. A little over a week later, Breuer was back in front of the press, giving a cushy deal to another huge international firm, the Swiss bank UBS, which had just admitted to a key role in perhaps the biggest antitrust/price-fixing case in history, the so-called LIBOR scandal, a massive interest-rate­rigging conspiracy involving hundreds of trillions (“trillions,” with a “t”) of dollars in financial products. While two minor players did face charges, Breuer and the Justice Department worried aloud about global stability as they explained why no criminal charges were being filed against the parent company.

“Our goal here,” Breuer said, “is not to destroy a major financial institution.”

A reporter at the UBS presser pointed out to Breuer that UBS had already been busted in 2009 in a major tax-evasion case, and asked a sensible question. “This is a bank that has broken the law before,” the reporter said. “So why not be tougher?”

“I don’t know what tougher means,” answered the assistant attorney general.

Cartoon of the day

Special mention

Cartoon of the day

Special mention

Too big to jail

 

This is Elizabeth Warren, whom I have called a modern-day Leonard Horner, in her first Banking Committee hearing.

Cartoon of the day

Special mention

 

Socialism is back?

Some of us wondered if, with the Fall of the Wall and the end of the Cold War, red-baiting would finally come to an end in the United States.

Apparently, it hasn’t—at least for New York Mayor Michael R. Bloomberg in commenting on Senate candidate Elizabeth Warren:

What I’ve tried to do is find liberal middle-of-the-road Republicans and Democrats. In the Senate, Scott Brown, who single-handedly stopped the right-to-carry bill. You can question whether he’s too conservative. You can question, in my mind, whether she’s God’s gift to regulation, close the banks and get rid of corporate profits, and we’d all bring socialism back, or the U.S.S.R.

How law works in the real world

A recent article in the Boston Globe, by Leon Neyfakh, just confirms my view that Elizabeth Warren is the Leonard Horner of the twenty-first century.

Elizabeth Warren’s departure

Elizabeth Warren—who was first set up and then sold out by Obama, who suffered a smear campaign by the Wall Street Journal and who was accused of lying by Republican members of the House Oversight subcommittee, whom I compared to Leonard Horner and who was my candidate for the vacancy on the Supreme Court—sent a farewell note to the nearly 500 staffers she hired (including one of my former students) and inherited from other federal agencies when she stepped down from the Bureau of Consumer Financial Protection this past Friday.

Today is my last day at the Bureau. I leave this agency, but not this fight. The issues we deal with—a middle class that has been squeezed and business models built on tricks and traps—are deeply personal to me, and they always will be.

I will cheer as you open a new chapter in our ongoing push for a strong and independent CFPB. You can realize the vision of a 21st century government that holds law-breakers accountable and that enforces basic rules that make markets work honestly. An honest market will give companies that provide fair value to their customers a chance to flourish, free from competition with cheaters. And an honest market will give American families better information, better prices, and better products—and a chance to achieve real economic security. Now it’s up to you -– and I couldn’t be more hopeful about what lies ahead.

We now live in a country that has fallen so far Warren’s vision—in favor of honest financial markets—is considered too radical.

Whodathunkit?

Yinka Shonibare, "The Age of Enlightenment—Antoine Lavoisier" (2008)

The Wall Street Journal is engaged in a smear campaign against Elizabeth Warren and the Consumer Financial Protection Bureau

Corporate profits have reached record highs, and they’re being used for everything except to create new jobs.

Big banks are saving billions of dollars, by taking shortcuts in processing troubled borrowers’ home loans, while billions of dollars of mortgages remain underwater.

Elite colleges mostly serve the sons and daughters of the elite.

The Republican governor of Michigan, where the unemployment rate has topped 10 percent longer than that of any other state, has decided to cut back on unemployment benefits.

Maybe economics is a science, maybe it isn’t.

There’s probably some kind of congruence between excessive formalization in economics, fraudulent claims to scientific power, ideological claims surreptitiously sneaked in, and mercenary dirty work done for the market.

Elizabeth Warren and Leonard Horner

Just as Leonard Horner was “persecuted and maligned by the manufacturers in every conceivable manner” in his day, so is Elizabeth Warren being relentlessly attacked by bankers and their Republican representatives in ours.

Horner was the head of factory inspection, who “carried on a life-long contest, not only with the embittered manufacturers, but also with the Cabinet, to whom the number of votes given by the masters in the Lower House, was a matter of far greater importance than the number of hours worked by the ‘hands’ in the mills.” Marx relied on the information supplied by Horner to describe the condition of the English working-class, and lauded him for having “rendered undying service to the English working-class.”

Similarly, Elizabeth Warren, first as the chair the five-member Congressional Oversight Panel created to oversee the implementation of the Emergency Economic Stabilization Act and now as Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau, has been carrying on a contest with embittered bankers and right-wing politicians to “fix broken consumer-credit markets and end guarantees for the big players that threaten our entire economic system” (source).

Just last week, she was attacked by Republican members of the House Financial Services Committee for trying to create easily understood consumer lending terms and stronger enforcement of predatory lending regulations. Her testimony [pdf] couldn’t have been more market friendly:

If there is a lesson from the past five years, it’s this: We all lose when consumers cannot readily determine whether they can afford to pay back their loans, and when lenders sell credit in ways that make it hard to see the risks and costs—in other words, when the system is in some ways fundamentally broken.  Personal responsibility is critical, and we all know that plenty of consumers have made purchases or taken on loans and risks that they knew they could not afford.  But the CFPB can have a critical role in advancing the interests of borrowers and lenders who want to play by the rules by promoting transparency and stronger competition.

For too long, regulation has been described as undermining the free market.  This is wrong.  The choice isn’t between regulation and the market or between consumers and lenders. The choice is between a market in which costs are impossible for the average consumer to calculate in advance and nasty surprises are hidden in the fine print, and a market in which prices and risks are clear up front so that products are transparent and apples-to-apples comparisons are possible. Good regulation is not about impeding market forces; it is about channeling those forces to make the market work better.  Good regulation is not about retribution designed to make an industry suffer; it is about rooting out deception and promoting transparency so that honest competition actually works.  Good regulation supports strong markets and makes strong markets more likely to persist over time.  This approach is based on faith in the good sense of American consumers to make the decisions that are best for them—once they have the basic information they need.

Clearly, that’s too much for the banks and the politicians they have in their pockets.

Warren is the twenty-first century equivalent of the factory inspector. Her services to the American working class should never be forgotten.

Note: the quotes referring to Leonard Horner are from chapter 5 of volume 3 and chapter 9 of volume 1 of Marx’s Capital.