HSBC is the 3rd largest bank in the world, it is a massive institution. 267,000 employees and over 2 trillion in holdings spread over 85 countries means it affects a lot of this planet. This week the United States Justice Department settled a money laundering case with them. The bank agreed to pay a fine of 1.92 billion (why not round it up to an even 2?) for laundering money for Mexican drug cartels.
In June ING paid a 619 million dollar fine for laundering to Cuba & Iran. Citigroup has paid hundreds of millions in fines the past 10 years for myriad of offenses including screwing retirees of Bell South in North & South Carolina. JP Morgan is being investigated for 15 Trilion, yes with a T trillion in laundering.
The problem is how do we stop it? This certainly isn't the first time massive banks have behaved criminally. But they have learned that our government is ever mindful of the economy, will not truly punish them.
The Obama administration, same as the Bush administration, listens to the advice of their Treasury Department, which warned if criminal charges are brought against the officers of the bank, that in itself is enough to send the world economy in to a tailspin. It has frustrated both sides of the media isle from the NY Times to the Washington Times. It's outraged Republican's like Tom Coburn and Democrats like Carl Levin. And yet here we sit. Big Banks continue to break the law because their top officials are immune from prosecution and the fines are paid by shareholders. In other words "crime pays".
So what do we do? We could risk it and go ahead with prosecution. But I believe the folks at the Treasury. If the Justice Department arrested the CEO and several executives who were in on the crime at a major firm we would have chaos. These banks have dealings with other corporations, other banks, pension funds etc. Stocks drop and we're all punished.
To me that means we have to break these banks up. In the late 70's through the early 80's the federal government sued AT&T. That lead to the company being broken up in to 7 pieces. That allowed other phone companies to really compete with AT&T.
Currently these banks are too big for regional banks to compete aginst, because regional banks have to follow the law. They can't help North Korea or Iran get around sanctions and make hundreds of millions.
But what if our treasury set up boundaries in our country. So that if we did freeze a banks assets the whole country or world didn't screech to a halt. I don't know what those limits are and I don't know how we do it, and I don't like government placing limits on business. But this too big to fail/too big to jail cycle we're in right now is leading to terrorist funding which is going to get us all killed if we don't stop it. I'd love to hear if you have any ideas on this.