comments_image Comments

Too Big to Jail: Big Banks Can Finance Terrorists and Walk Away Scot-Free

HSBC receives get-out-of-jail-free card in a real-life game of Monopoly.

The New York Times reports this week that megabank HSBC has escaped criminal prosecution for money laundering that probably funded terrorists and narcotics traffickers. Why? Because regulators and prosecutors were petrified that an indictment would undermine the entire financial system. The Times quotes anonymous government sources who confessed fears about bringing formal charges because doing so would be a "death sentence" for the bank. So they let it off the hook.





Senator Carl Levin, chairman of the U.S. Senate Permanent Subcommittee on Investigations, a congressional watchdog panel, observed that "the culture at HSBC was pervasively polluted for a long time." Now we can be certain it will remain so. Criminal activity has been legitimized. In the world of banking, crime pays, big-time.



In his first term, President Obama promised to do something about too-big-to-fail banks, which can defraud consumers and poison them with toxic products, grossly neglect their duties to shareholders, and tank the economy – only to be rescued with public money. There has been much bold talk about fixing the problem; little meaningful action. Today, big banks are even bigger and more dangerous than they were before the financial crisis.

It should be clear by now that the banking industry has become an oligopoly -- a scenario in which an industry is controlled by a small number of firms. When big banks blew up the economy and helped bring on the Great Depression, they got broken up. Congress passed the Glass-Steagall Act, which separated insured commercial banks from speculative investment banking. But starting in the mid-'80s, regulators looked benevolently away while massive consolidation in the industry shrank the total number of American banks as bigger banks swallowed little ones. So today, the biggest banks control a larger and larger share of deposits.