Criminal law, Justice, Politics

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”

  4. The New 007 License to Kill: HSBC and Big Banks
    By Mark Karlin
    http://truth-out.org/buzzflash/commentary/item/17692-the-new-oo7-license-to-kill-hsbc-and-big-banks

    Excerpt:
    The Department of Justice has fined banks involved with money laundering token amounts (although they appear large, they are a small percentage of a bank’s profits and the loss is covered by shareholders, not the executives responsible for the money laundering). The violations have ranged from accepting narco money knowingly to taking funds from banks and nations with ties to terrorists to doing banking with countries that the US has sanctions against.

    The Post reminds readers:

    But a string of august names in global banking — Credit Suisse, Lloyds Bank, ABN Amro, ING Bank and now HSBC — have reached settlements in the past couple of years with the U.S. government for billions of dollars in tainted transactions. These investigations have revealed that weaknesses in the financial system lay not with the so-called hawala brokers of Karachi, Pakistan, but the bespoke bankers of London, Amsterdam and Geneva, and their American affiliates. The loss of moral legitimacy in the Department of Justice and the Obama administration in adopting a policy that the bigger the financial crime the less likely to criminally prosecute it is an affront to the rule of law.

    As one reader wrote BuzzFlash in response to our commentary yesterday: “I recall Feds prosecuting folks in Chicago who bought money orders to launder proceeds of drug profits for a couple thousand dollars each to be sent out of the country. Yet banks which admitted money laundering hundreds of millions (perhaps billions) in drug profits get off with paying a fine?”

    For big banks and Wall Street financial firms, there are a different set of rules; there are basically few violations of banking laws — very few — that will lead to criminal prosecution. Yes, an individual bank executive might be indicted for embezzling from a bank, but bank executives won’t be prosecuted for facilitating the fortunes made by drug traffickers or financially working with banks and nations that, according to the US government, seek to attack or undermine the interests of America.

    Given the death toll in Mexico, Central America, Colombia and elsewhere due to the show-war on drugs, banks like HSBC (and the other banks that have and likely continue to engage in illicit drug money laundering in Mexico and South America) aren’t just violating laws when they willingly accept the deposits of narco; they are acting as accessories to murder.

    Without the ability to launder hundreds of millions of dollars, perhaps billions, through American banks, the drug cartels and their partners in the Mexican government (including many politicians, federal police, members of the military – including generals – and often the local police), no doubt fewer citizens would have been killed in Mexico up to this point.

  5. What about the Crime Victims Rights law? You’re supposed to be able to file in court even if there is no prosecution but I don’t know if any of the Federal Courts are actually accepting and processing such complaints.

  6. The Department of Justice? Not for Wall Street
    By Brian Young and Brian Kettering
    2/04/2013
    http://www.huffingtonpost.com/brian-young/the-department-of-justice_1_b_2618206.html

    Excerpt:
    So, why is criminal court off the table in the financial sector? Well, maybe the harm is not as severe, one might argue. But that’s simply not true. In fact, in some cases the trauma and harm caused by foreclosure can be more devastating and far reaching in a community than any car accident.

    Take Ana and Jose Mendez from Springfield, Mass. After they fell behind in their mortgage payments due to a loss of income, they did what millions of families were told to do — they contacted the bank. Aurora Bank offered them a temporary trial modification, like millions of other families. The Mendez family obliged and paid for six consecutive months. At the end of the trial period, Aurora Bank refused a permanent modification and offered another trial. The family obliged again and paid for six more months at a higher price — hoping that this time they would get a permanent modification. At the end of that period, Aurora again refused a permanent modification and offered one last six-month trial modification. The Mendez family paid those six months. At the end of 18 months of trial payments, Aurora Bank refused to permanently modify the loan and foreclosed.

    Jose Mendez expressed his frustration to a local CBS News Affiliate in Springfield, stating, “I don’t understand the logic that the banks use to evict our communities, all these buildings stay empty without any benefit to our communities.”

    The Mendez family struggle is ongoing. Aurora Bank FSB, which is the legacy of the now defunct Lehman Brothers refused to accept the Mendez family’s offer to pay rent and is now no longer negotiating in good faith. Aurora Bank has chosen to proceed with eviction. The Mendez family is willing to move if Aurora Bank can find a buyer who signs an affidavit to move into the home, but the bank would rather leave the home vacant than work with the family.

    This is just one example of the thousands of families whose lives have been upended without any recourse or justice. If anyone else stole rent for a home from a family, we would haul them into court. Who will stand up for the Mendez family in court?

    That’s why it is so critical that bankers who committed criminal fraud be held to account for their crimes. Any criminal justice expert will tell you that if there is no punishment, there is no deterrent. Bankers need a deterrent to prevent them from cooking up the next crisis that will bankrupt America.

  7. Maybe they need a new agency name? With a few exceptions (Civil Rights Division, etc) this is an Executive Branch agency that protects the Executive Branch’s top leadership. True checks and balances require “checks” by other branches of government. Sounds innocuous but if citizens need protection and think the DOJ will provide justice it can be very harmful or even fatal to trust them – in some cases the DOJ intentionally obstructs justice (a federal crime). Maybe the “Attorney General’s Department” or the “Bureaucracy Protection Department” would be more accurate?

  8. Masters of the Universe
    Our broken government believes banks are too big to fail, curtail, or jail
    By Idrees Kahloon
    http://www.thecrimson.com/column/body-politic/article/2013/2/20/bankers-government-corrupt/

    Excerpt:

    Body Politic

    Sherman McCoy, the testy, testosterone-filled 1980’s bond salesman of Tom Wolfe’s Bonfire of the Vanities, frequently calls himself a “Master of the Universe.” The Master of the Universe is a demigod above the law of us plebeians, egotistically immersed in a life of conspicuous consumption and addicted to the adrenaline-fueled machismo of making billion dollar bets.

    Thankfully, McCoy is a frightful fiction—our country’s laws prevent such impertinence. “The United States maintains one of the strongest and most effective anti-money laundering and counter-terrorist financing regimes of the world,” David S. Cohen of the Treasury Department assured the nation.

    So when it was discovered that HSBC knowingly laundered for ruthless drug cartels and Russian mobsters, transacted with blackballed organizations that bankrolled Hezbollah and Al-Qaeda, and helped Iran and North Korea evade sanctions, our robust regulatory agencies sounded the bank’s death knell. Right?

    Given all the corporations-are-people bluster in the air—and that breathing in the same vicinity as Al-Qaeda, let alone moving billions of dollars for it, are possible grounds for placement on President Obama’s kill list and an eventual zapping-from-the-sky—didn’t our Very Tough Officials press severe criminal charges? HSBC will surely lose its banking license, right?

    Wrong.

    Not one person behind the decade-long, mind-bogglingly heinous crimes of HSBC will spend a single day in jail. Not one person at HSBC who provided one billion dollars to the terrorist-linked Al-Rajhi bank in Saudi Arabia, or who washed the blood from the hundreds of millions of dollars coming from Mexico’s Sinaloa and Colombia’s Norte del Valle drug cartels, will have to personally pay a single dollar.

    Instead the Department of Justice issued a fine for $1.9 billion—about five weeks’ worth of profit.

    The new normal of banking is a pattern of massive fraud encouraged—er, punished—by these impotent wrist slaps. Profits are privatized among the shareholders, and losses are subsidized by the taxpaying shmucks. Now, congressional Republicans want to do away with the Volcker Rule so that banks can gamble with their clients’ money too.

    There is an epidemic of amnesia when it comes to bank regulation in Washington. Sycophantic lawmakers fawn over CEOs, jockeying for favor and a slice of an almost $500 million lobbying pie. Bending over backwards for the banks, Congress expressed little outrage regarding the HSBC settlement. And less than two weeks after the HSBC settlement came the announcement that UBS was getting away with rate-rigging LIBOR for a measly $1.5 billion.

    Basically, a bunch of bankers from prestigious financial institutions like Barclays and the Royal Bank of Scotland colluded to distort the LIBOR index to misrepresent the strength of their banks and make their trades more lucrative. The problem is that LIBOR is a crucial determinant in the prices of hundreds of trillions of dollars worth of assets—any imaginable financial instrument, from college loans to credit cards to mortgages, was artificially distorted to help traders make a few extra dollars on their deals.

    In an encouraging change of pace, Senator Elizabeth A. Warren exposed the farcical power of the Very Tough Officials by asking a simple question: “Tell me a little bit about the last few times you’ve taken the biggest financial institutions on Wall Street all the way to a trial.”

    The silence was telling. Eventually, Thomas J. Curry, Comptroller of the Currency, mumbled the disheartening, but illuminating, admission that “we do not have to bring people to trial.”

  10. Putting the top leadership in prison and replacing them with better leadership doesn’t destroy any corporation but unlike fines (merely the cost of doing business) – this medicine is a real deterrent to minimize future crimes. Keep in mind that by and large 9/11 has been exploited to go after legal and peaceful Americans to benefit campaign contributors so why won’t the DOJ go after real suspects that aided the enemy?

  11. rafflaw 1, February 25, 2013 at 12:32 am

    RWL.
    Adjustable Rate Mortgages in theory are not part of the problem. When lenders require credit worthy people to pay above market rates on an adjustable rate basis, then they become dangerous to the unknowing who accepted those bad loans.
    ======================
    Not if they turn in the keys and just walk away.

  12. RWL.
    Adjustable Rate Mortgages in theory are not part of the problem. When lenders require credit worthy people to pay above market rates on an adjustable rate basis, then they become dangerous to the unknowing who accepted those bad loans. Most ARM’s are a bit of a gamble, but they are usually written to include maximum percentages that the loan rate can be changed on a yearly basis. Many times the first 3-5 years are fixed at a rate below market and at the first change date the rate can only be raised a maximum of 2% points. However, the ARM’s that are a problem are the ones with high rates to begin with and without a year to year limitation. Many of these B paper loans were sold to people who had good enough credit to not require the higher rates, but they were sold a bill of goods.

  13. I forgot to add that Congress & the Presidency used ‘tax payers dollars to bail the banks out’, and then, the banks used those same bailout funds to pay toward the federal & state lawsuits-settlement purposes-and their lawyers.

  15. Great Article!

    I think that we-the American People-deserve some of the blame: By allowing this to have transpired, and still tolerate this ongoing nonsense. We were so happy to get that home and auto loan, so happy to go out and vote for this candidate, so ‘thrilled’ to get into student loan and credit card debt, and on and on………

    A couple of months ago, I was reading an online article, from MSNBC, and was shocked to uncover that Adjustable Rate Mortgages (ARMs) and credit card debt (more people are paying with their credit cards at their local Wal-Mart or grocery stores instead of using cash) have been increasing at an alarming rate, student loan debt totals more than $1 trillion, and the unemployment rate remains relatively high. Do I see another economic recession on the horizon or is this the new normal?

    We continue to make poor choices with our finances, and we need to stop trying to go after Wall Street (protected by the federal government: On FoxBuniess News-I think it was on the Gerri Willis Show-a lawyer was stating that the US Government quickly filed lawsuit and settled with the major banks over the mortgage crisis, preventing us-all of America’s homeowners-from filing suit against them for the same crime, meaning that they would have had to ‘shell out more dough;’ Some lawyers believe that we can still file suit?). Instead, we need to do our ‘homework’ before we go into debt, and before we elect certain individuals into office.

  16. Pingback: Individual Responsibility Except for Banks - Pilant's Business Ethics

  18. Thanks for the link, pete.

    Elaine … all we can do is keep on pushing … keep on publishing …the power of drip, drip, drip.

Comments are closed.