Taibbi: DOJ's Settlement With HSBC Was Already Bank's Third Strike

In the latest issue of Rolling Stone, Matt Taibbi takes the Justice Department to task over settling with HSBC late last year in the “largest drug-and-terrorism money-laundering case ever.” "The HSBC case went miles beyond the

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[Artwork by Victor Juhasz, Rolling Stone]

In the latest issue of Rolling Stone, Matt Taibbi takes the Justice Department to task over settling with HSBC late last year in the “largest drug-and-terrorism money-laundering case ever.”

"The HSBC case went miles beyond the usual paper-pushing, keypad-punching­ sort-of crime, committed by geeks in ties, normally associated­ with Wall Street," Taibbi writes. "In this case the bank literally got away with murder – well, aiding and abetting it, anyway."

Three-time losers doing life in California prisons for street felonies might be surprised to learn that the no-jail settlement Lanny Breuer worked out for HSBC was already the bank's third strike. In fact, as a mortifying 334-page report issued by the Senate Permanent Subcommittee on Investigations last summer made plain, HSBC ignored a truly awesome quantity of official warnings.

In April 2003, with 9/11 still fresh in the minds of American regulators, the Federal Reserve sent HSBC's American subsidiary a cease-and-desist­ letter, ordering it to clean up its act and make a better effort to keep criminals and terrorists from opening accounts at its bank. One of the bank's bigger customers, for instance, was Saudi Arabia's Al Rajhi bank, which had been linked by the CIA and other government agencies to terrorism. According to a document cited in a Senate report, one of the bank's founders, Sulaiman bin Abdul Aziz Al Rajhi, was among 20 early financiers of Al Qaeda, a member of what Osama bin Laden himself apparently called the "Golden Chain." In 2003, the CIA wrote a confidential report about the bank, describing Al Rajhi as a "conduit for extremist finance." In the report, details of which leaked to the public by 2007, the agency noted that Sulaiman Al Rajhi consciously worked to help Islamic "charities" hide their true nature, ordering the bank's board to "explore financial instruments that would allow the bank's charitable contributions to avoid official Saudi scrutiny." (The bank has denied any role in financing extremists.)
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UBS, meanwhile, was a similarly elemental case, in which the offenses­ didn't just violate the letter of the law – they threatened the integrity of the competitive system. If you're going to let hundreds of boozed-up bankers spend every morning sending goofball e-mails to each other, giving each other super­hero nicknames while they rigged the cost of money (spelling-challenged UBS traders dubbed themselves, among other things, "captain caos," the "three muscateers" and "Superman"), you might as well give up on capitalism entirely and just declare the 16 biggest banks in the world the International Bureau of Prices.

In closing, Taibbi laments that worse than the "1.9 billion, or about five weeks' profit" actual settlement was the explanation Breuer offered for them:

"In the world today of large institutions, where much of the financial world is based on confidence," Breuer said, "a right resolution is to ensure that counter-parties don't flee an institution, that jobs are not lost, that there's not some world economic event that's disproportionate to the resolution we want."

"When you admit that some people are too important to prosecute," Taibbi explains, " it's just a few short steps to the obvious corollary – that everybody else is unimportant enough to jail."

"An arrestable class and an unarrestable class. We always suspected it, now it's admitted. So what do we do?"

It's a lengthy piece, and classic Taibbi, and it's your "Must Read" for the day, if you haven't already done so.

Where do we go from here? Discuss below.

About Diane Sweet

Diane Sweet's picture
Senior Editor, Lives in a gerrymandered district in Michigan.

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