Follow the money

Daley’s View: Whatever Happened to the Rule of Law?

Many years ago I heard with bemusement that Mafia like organizations were springing up in Russia following the collapse of Communism. The reports suggested that these associations were emerging because their organizers thought that Capitalism actually sanctioned criminal behavior and they were only following the new rules.

I was bemused because I was positive that the Russian Mafioso had misunderstood. Western Capitalism operated within the context of the rule of law.

On February 28th Rolling Stone Magazine published an article: “Gangster Bankers: Too Big to Jail.” The article details how HSBC, Europe’s largest bank, laundered some $200 Trillion from drug cartels, Al Qaeda, Hezbollah, Iran, Cuba and other proscribed sources into U.S. banks in direct violation of federal law. HSBC has to pay $1.9 Billion in fines and forfeitures. But there will be no criminal prosecutions.

No one seems to dispute that it was impossible to run $200 Trillion through HSBC without someone there noticing. The bank clearly was complicit in these crimes. But the U.S. Justice Department, with guidance from the Department of the Treasury, decided to bring no criminal charges.

Here’s the reason not to prosecute these criminals given by Assistant Attorney General Lanny Breuer: “Had the U.S. authorities decided to press criminal charges, 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 constantly amazes me that actual humans can stand before the public and say stuff like that.

No one maintains that these latest HSBC crimes are exceptional – they have done it before. Yep. HSBC received repeated “cease and desist” orders for similar behavior in 2003 and in 2010.

It is criminal neglect to believe that these fines will prevent HSBC from doing it again, again.

This is just the biggest and most recent case. In addition to the other money laundering schemes by big banks related in the Rolling Stone article, there are other failures to prosecute that are equally alarming.

Remember the decision to bring no criminal charges against a mortgage loan industry that knowingly enticed home buyers into unsustainable loans, sold them as securities, and brought down the economy. Not only have there been no prosecutions, but also the banks were bailed out by the government. Too big to fail.

When advocates suggested that the unfortunate victims of these practices should have access to programs that would let them reduce the principle for their underwater mortgages, the very lenders who were bailed out by the government had the gall to suggest that the borrowers should suffer the consequences of their decisions and lose their homes.

The bank enticed its victims into the risk, lost its shirt, and was bailed out by the government. But the borrowers have been subject to the theory of “moral hazard” – the borrower took the risk and should pay the consequences.

Remember the foreclosure processors who helped lenders to take homes fraudulently, without due process and without documentation? No prosecutions.

If “moral hazard” will prevent ordinary people from taking loans that they cannot sustain in a recession, will not prosecution prevent criminals from repeating their crimes? One might think so. But instead we bail them out, enable multimillion compensation packages for the executives who designed these crimes, and throw families out of their homes.

It goes on and on.

We let the malefactors of great wealth commit crimes but we do not put those criminals in jail. We have a huge prison population that is disproportionately people of color who were caught selling dope, but the executives of HSBC who abetted Al Qaeda are walking free.

As it turns out, the Russian Mafia was right all along and my assumptions about the rule of law were simply naïve.

These chronicles of unprosecuted crimes raise a larger question: How can we regulate criminal behavior in an increasingly global economy? If the U.S. government refuses to prosecute these crimes, who will prosecute them? If there are no prosecutions how will they be stopped?

There is at least a part of a solution that we could do here in the United States. Too big to fail or jail should be analogous to too big to exist. In 2010 Ohio Senator Sherrod Brown and 30 other Senators introduced legislation to break up the big banks. That legislation should be dusted off and resubmitted.

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