Just Fine: Don’t Bank on the Justice Department to Prosecute Big Banks

DeptofJusticeSubmitted by Elaine Magliaro, Guest Blogger

Last December, I wrote a post titled You Call This Justice? DOJ Criticized for Its Settlement with “Too Big to Jail” Bank HSBC. It appears that the US Justice Department isn’t too keen on bringing criminal charges against ANY wealthy bankers—not just those who work for HSBC, a huge international bank that has knowingly laundered money for drug cartels and murderers. The unethical shenanigans of the banksters of Wall Street that led to the near collapse of the US economy and to a recession don’t seem to merit jail time for the perpetrators—just a slap on the wrist and a fine.  No individual fines are paid though. The mega banks pay the fines and the banksters continue to go about their business…and continue to earn hefty salaries and bonuses.

At “Wall Street Reform: Oversight of Financial Stability and Consumer and Investor Protections,” the first Banking Committee hearing attended by Senator Elizabeth Warren (D, MA), Warren asked bank regulators how tough they really are on the biggest financial institutions on Wall Street and about the last few times they actually took any banks all the way to a trial.

A few weeks ago, Bill Moyers sat down with Matt Taibbi to talk about the HSBC settlement, UBS and the Libor Scandal, Lanny Breuer, Mary Jo White, and the revolving door in Washington, D.C.

Not long after Taibbi’s appearance on Bill Moyers’s program, his article on HSBC , Gangster Bankers: Too Big to Jail, was published in Rolling Stone.

Quoting from Taibbi’s article:

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.”

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.

Taibbi added that the Justice Department’s recent $1.9 billion settlement with HSBC was the big bank’s “third strike.”

In late January, PBS aired a Frontline program titled The Untouchables. The following day, David Sirota of Salon wrote about the program. Sirota called it a “stunning report” that exposed how the Obama administration deals with the malfeasance of the bankers on Wall Street.

Quoting Sirota:

PBS Frontline’s stunning report last night on why the Obama administration has refused to prosecute any Wall Streeter involved in the financial meltdown doesn’t just implicitly indict a political and financial press that utterly abdicated its responsibility to cover such questions. It also — and as importantly — exposes the genuinely radical jurisprudential ideology that Wall Street campaign contributors have baked into America’s “justice” system. Indeed, after watching the piece, you will understand that the word “justice” belongs in quotes thanks to an Obama administration that has made a mockery of the name of a once hallowed executive department…

The piece by PBS reporter Martin Smith looks at how Obama has driven federal prosecutions of financial crimes down to a two-decade low. It also documents the rampant and calculated mortgage securities fraud perpetrated by the major Wall Street banks, who, not coincidentally, were using some of the profits they made to become among President Obama’s biggest campaign donors.

As we see, that campaign money didn’t just buy massive government bailouts of the banks, a pathetically weak Wall Street “reform” bill or explicit reassurances from Obama’s campaign that the president would refrain from criticizing bankers. Frontline shows it also bought a Too Big to Jail ideology publicly championed by the white-collar defense lawyer turned Obama prosecutor Lanny Breuer.

I recommend watching Frontline’s The Untouchables. It’s nearly 54-minutes long. Here’s the link:

http://www.pbs.org/wgbh/pages/frontline/untouchables/

SOURCES & FURTHER READING

Gangster Bankers: Too Big to Jail
 How HSBC hooked up with drug traffickers and terrorists. And got away with it (Rolling Stone)

Justice Department’s New Get-Tough Policy Is, Well, Not (Rolling Stone)

Choice of Mary Jo White to Head SEC Puts Fox In Charge of Hen House (Rolling Stone)

Are banks too big to jail?: PBS Frontline’s stunning report shows how the Obama administration undermined the rule of law (Salon)

Why Mary Jo White is the wrong pick for the SEC (CNN Money)

Jack Lew and the Obama Administration’s Finance-Friendly Status Quo (The Daily Beast)

Assistant Attorney General Lanny A. Breuer Speaks at the New York City Bar Association–Thursday, September 13, 2012 (The United States Justice Department)

109 thoughts on “Just Fine: Don’t Bank on the Justice Department to Prosecute Big Banks

  1. Tuesday, Mar 5, 2013 03:57 PM EST

    The Dow’s meaningless rebound

    On Tuesday, it rose above 14,000. Meanwhile, the median wage is down and unemployment remains sky-high

    By Robert Reich

    http://www.salon.com/2013/03/05/stock_market_success_partner/

    Excerpt:

    “Today the Dow Jones industrial average rose above 14,270 – completely erasing its 54 percent loss between 2007 and 2009.

    The stock market is basically back to where it was in 2000, while corporate earnings have doubled since then.

    Yet the real median wage is now 8 percent below what it was in 2000, and unemployment remains sky-high.

    Why is the stock market doing so well, while most Americans are doing so poorly? Four reasons:

    First, productivity gains. Corporations have been investing in technology rather than their workers. They get tax credits and deductions for such investments; they get no such tax benefits for improving the skills of their employees. As a result, corporations can now do more with fewer people on their payrolls. That means higher profits.

    Second, high unemployment itself. Joblessness all but eliminates the bargaining power of most workers – allowing corporations to keep wages low. Public policies that might otherwise reduce unemployment – a new WPA or CCC to hire the long-term unemployed, major investments in the nation’s crumbling infrastructure – have been rejected in favor of austerity economics. This also means higher profits, at least in the short run.

    Third, globalization. Big American-based corporations have been expanding and hiring around the globe where markets are growing fastest – even while the U.S. market is lackluster. Tax policies and trade policies have encouraged them.

    Finally, the Fed’s easy-money policies. They’ve pushed investors into the stock market because bond yields are so low. On Tuesday, the yield on the 10-year U.S. Treasury note was just 1.9 percent.

    All of this spells widening inequality in America, because the people who invest the most in the stock market have high incomes. Those who rely most on wages have lower incomes.

    Corporate profits are claiming a larger share of national income than at any time in 60 years, while the portion of total income going to employees is near its lowest since 1966.

    As my colleague Immanuel Saez recently found, all the economic gains between 2009 and 2011 (the last year for which data were available) went to the richest 1 percent of Americans. The bottom 99 percent has continued to lose ground.

    The sequestration is likely to make all this worse, since it will slow the U.S. economy and keep unemployment higher than otherwise.

    It will also hurt the most vulnerable. Some $1.9 billion in low-income rental subsidies are being eliminated, affecting 125,000 people. Cuts to the Department of Agriculture will eliminate rental assistance for another 10,000 low-income rural people. Meanwhile, 100,000 formerly homeless people are likely to be removed from their current emergency shelters.

    More than 3.8 million Americans receiving long-term unemployment benefits will have their monthly payments reduced by as much as 9.4 percent, and lose an average of $400 in benefits over their period of joblessness.

    The Department of Education’s Title I program, which helps schools serving more than a million disadvantaged students, will be cut $715 million, and $400 million will be cut from Head Start, the preschool program for poor children. And major cuts will be made in the Special Supplemental Nutrition Program for Women, Infants, and Children, which provides nutrition assistance and education.

    Rarely before in American history have public policies so radically helped the most fortunate among us, so cruelly harmed the least fortunate, and exposed so many average working Americans to such widespread insecurity.

    Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. “

    • AP,

      With Financials (Big Banks) leading the rally, and the retail sector a close 2nd. Thanks in part to we-the-people, bailing the big banks out via staying in debt, and then, we-the-consumers-continue to spend…..spend….spend by increasing our indebtness. This rally won’t last long or maybe this is the new norm. You have to feel a little sad for those college seniors and grad students graduating this May,and unable to find a good job.

  2. Eric Holder Admits Some Banks Are Just Too Big To Prosecute
    By Mark Gongloff
    Posted: 03/06/2013
    http://www.huffingtonpost.com/2013/03/06/eric-holder-banks-too-big_n_2821741.html

    Excerpt:
    When the Attorney General of the United States admits some banks are simply too big to prosecute, it might be time to admit we have a problem — and that goes for both the financial and justice systems.

    Eric Holder made this rather startling confession in testimony before the Senate Judiciary Committee on Wednesday, The Hill reports. It could be a key moment in the debate over whether to do something about the size and complexity of our biggest banks, which have only gotten bigger and more systemically important since the financial crisis.

    “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy,” Holder said, according to The Hill. “And I think that is a function of the fact that some of these institutions have become too large.”

    Holder’s comments don’t come as a total surprise. His underlings had already made similar confessions to The New York Times last year, after they declined to prosecute HSBC for flagrant, years-long violations of money-laundering laws, out of fear that doing so would hurt the global economy. Lanny Breuer, formerly in charge of doling out the Justice Department’s wrist slaps to banks, told Frontline as much in the documentary “The Untouchables,” which aired in January.

  3. Elizabeth Warren Takes On Eric Holder’s ‘Too Big To Jail’ Statement
    The Huffington Post
    By Mollie Reilly
    03/06/2013
    http://www.huffingtonpost.com/2013/03/06/elizabeth-warren-eric-holder_n_2823618.html?1362616052

    Excerpt:
    Sen. Elizabeth Warren (D-Mass.) took on Attorney General Eric Holder’s admission that some banks are too big for the Justice Department to prosecute, asserting that Holder’s statement illustrates why the financial institutions should be held accountable.

    “It has been almost five years since the financial crisis, but the big banks are still too big fail,” Warren said in a Wednesday statement. “That means they are subsidized by about $83 billion a year by American taxpayers and are still not being held fully accountable for breaking the law. Attorney General Holder’s testimony that the biggest banks are too-big-to-jail shows once again that it is past time to end too-big-to-fail.”

  4. Elizabeth Warren Slams Federal Regulators Over Bank Money Laundering
    —By Erika Eichelberger
    Thu Mar. 7, 2013
    http://www.motherjones.com/mojo/2013/03/elizabeth-warren-senate-banking-committee-hearing-money-laundering

    Excerpt:
    On Thursday, the Senate held a hearing to ask federal regulators why they are not stopping banks from allowing money laundering. Sen. Elizabeth Warren (D-Mass.) was the highlight of the show, slamming a Treasury official who refused to weigh in on whether the banks should face more severe penalties.

    In December, the giant international bank HSBC was fined $1.9 billion for illegally allowing millions in Mexican drug trafficking money to be laundered through its accounts. But it’s not just HSBC—this is a systemic problem. Ten banks have been penalized in recent years for failure to comply with anti-money laundering rules. The Senate banking committee held the hearing in order to interrogate regulators at the Federal Reserve, Treasury Department, and the Office of the Comptroller of the Currency about why they are not doing more to stop these kinds of shenanigans.

    All of the regulators said they were working on improving regulations and enforcement and protested that it was up to the Department of Justice—not them—to decide whether prosecution was appropriate. (The Justice Department did not have a witness at the hearing.) They were reluctant to weigh in on whether they thought HSBC should have faced trial, even though they consult closely with the DOJ on bank activities. That infuriated Warren:

    The US government takes money laundering very seriously for a good reason. And it puts strong penalties in place… It’s possible to shut down a bank… Individuals can be banned from ever participating in financial services again. And people can be sent to prison. in December, HSBC admitted to… laundering $881 million that we know of… They didn’t do it just one time… They did it over and over and over again… They were caught doing it, warned not to do it, and kept right on doing it. And evidently made profits doing it. Now, HSBC paid a fine, but no individual went to trial. No individual was banned from banking and there was no hearing to consider shutting down HSBC’s actives in the US…. You’re the experts on money laundering. I’d like your opinion. What does it take? How many billions of dollars do you have to launder for drug lords and how many sanctions do you have to violate before someone will consider shutting down a financial institution like this?

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