For the past 5 years, we’ve watched with a combination of incredulity and resignation the elaborate farce of Wall Street bankers, the same ones who brought the world economy to its knees and ushered in the Second Great Depression, being deemed too big to jail.
Such as those in charge of HSBC.
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.”
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.”
Or those who run JP Morgan Chase:
JPMorgan is close to paying about $2 billion to settle claims that, as Madoff’s main bank for many years, it ignored blatant signs that Madoff was up to no good, the New York Times reports. As part of the deal, JPMorgan will also enter what’s known as a deferred prosecution agreement, where everybody will agree that the biggest U.S. bank broke criminal laws and also that prosecutors don’t plan to do anything about it, as long as JPMorgan keeps its nose clean.
Prosecutors, including U.S. Attorney Preet Bharara, considered and rejected the idea of making the bank actually plead guilty to criminal charges, according to the NYT. That’s disappointing, considering it was Bharara who declared this summer: “I don’t think anyone is too big to indict, no one is too big to jail. There’s enough moral hazard in the industry. If you give people a blank check and tell them they have a get-out-of-jail-free card because of their size…that’s a very dangerous thing.”
That seems to be exactly what happened in this case — giving JPMorgan a get-out-of-jail-free card because of its size — marking at least the third time in the past two years the bank has managed to dodge an indictment.
Even though many find it hard to believe how, time and again, the bankers have been let off the hook. Such as Forbes columnist Ted Kaufman:
Why? Why has no one been held responsible? There are many reasons, including the complexity of the cases and the lack of criminal referrals from the regulatory agencies. But perhaps the key reason is that those most responsible for indicting and prosecuting Wall Street executives seem to believe that, just as there are banks that are too big to fail, there are people who are too big to jail.
In a speech he gave last fall, the retiring head of the Criminal Division in the Department of Justice, Lanny Breuer, explained that position: “To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs and economists who argue that the collateral consequences of an indictment would be devastating for their client. In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects.
“Sometimes–though, let me stress, not always–these presentations are compelling. In reaching every charging decision, we must take into account the effect of an indictment on innocent employees and shareholders, just as we must take into account the nature of the crimes committed and the pervasiveness of the misconduct. I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake. And, in some cases, the health of an industry or the markets is a real factor. Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.” . . .
Nothing I have seen in the past four years leads me to believe that Wall Street as a whole learned much from the events of 2008-2009. The government’s bailouts that helped the big banks survive have been pretty much forgotten. The multimillion-dollar bonuses are back with a vengeance, and with them incentives to cut corners and, for some, to circumvent the law.
And even William Dudley, the President and Chief Executive Officer of the Federal Reserve Bank of New York:
Some argue that what I have proposed—higher capital requirements and better incentives that reduce the probability of failure combined with a resolution regime that makes the prospect of failure fully credible—are insufficient. Perhaps, this is correct. After all, collectively these enhancements to our current regime may not solve another important problem evident within some large financial institutions—the apparent lack of respect for law, regulation and the public trust. There is evidence of deep-seated cultural and ethical failures at many large financial institutions. Whether this is due to size and complexity, bad incentives or some other issues is difficult to judge, but it is another critical problem that needs to be addressed.
As it turns out, the only country where bankers are not too big to jail is Iceland [ht: sm] (which, to remind readers, is where the Inside Job began its story):
Four former bosses from the Icelandic bank Kaupthing have been sentenced to between three and five years in prison.
They are the former chief executive, the chairman of the board, one of the majority owners and the chief executive of the Luxembourg branch.
They were accused of hiding the fact that a Qatari investor bought a stake in the firm with money lent – illegally – by the bank itself.
Kaupthing collapsed in 2008 under the weight of huge debts.