Above The Law

Above the law

By Barry Grey
WSWS.org
December 14, 2012

In the latest scandal involving the criminal activities of major banks,
the US Justice Department on Tuesday announced a $1.9 billion
settlement with British based HSBC on charges of money laundering
on a massive scale for Mexican and Colombian drug cartels.

The deal was specifically designed to avert criminal prosecution of
either the bank, the largest in Europe and third largest in the world,
or any of its top executives.

Even though the bank admitted to laundering billions of dollars
for drug lords, as well as violating US financial sanctions against
Iran, Libya, Burma and Cuba, the Obama administration avoided
an indictment by means of a, “deferred prosecution agreement.”

The agreement was in keeping with the policy of the US government
of shielding top bankers from any accountability for illegal activities
that led to the collapse of the financial system in 2008 and ushered
in the global recession.

Not a single leading executive of a major bank has been prosecuted,
let alone jailed, for fraudulent activities that triggered the present
crisis, leading to the destruction of millions of jobs and the
decimation of working-class living standards in the US and around
the world.

Under the protection of the state, the frenzied speculation and
swindling continue unabated, underpinning record profits for
the banks and bigger than ever multi-million dollar compensation
packages for top bankers.

In a front-page article on Tuesday, the New York Times outlined
internal discussions within the Obama administration that led to
the decision not to indict HSBC.

The Times reported that prosecutors at the Justice Department and
the New York District Attorney’s office pushed for a compromise in
which the bank would be indicted not for money laundering, but for
the lesser charge of violating the Bank Secrecy Act.

Even this, however, was too much for the Obama administration.

The Treasury Department, headed by former New York Federal
Reserve President Timothy Geithner, and the Office of the
Comptroller of the Currency, the federal regulatory agency charged
with policing major banks including HSBC, vetoed any prosecution
on the grounds that a serious legal blow to HSBC would jeopardize
the financial system.

What does this mean?

HSBC, in its pursuit of profit, facilitated the activities of drug
cartels that have been the target of the so-called, “drug war”
a war prosecuted by the Mexican military at the behest of and
with the collaboration of Washington, in which over 60,000
people have died.

This is in addition to the human suffering caused by the narcotics
trade in the US and around the world.

It was allowed to pay a token fine, less than 10 percent of its
profits for 2011 and a fraction of the money it made laundering
the drug bosses blood money.

Meanwhile, small-time drug dealers and users, often among the
most impoverished and oppressed sections of the population, are
routinely arrested and locked up for years in the American prison
gulag.

The financial parasites who keep the global drug trade churning
and make the lion’s share of money from the social devastation
it wreaks are above the law.

As the Times put it, “certain financial institutions, having
grown so large and so interconnected, are too big to indict.”

Here, in a nutshell, is the modern-day aristocratic principle
that prevails behind the threadbare trappings of democracy.

The financial robber barons of today are a law unto themselves.

They can steal, plunder, even murder at will, without fear of
being called to account.

They devote a portion of their fabulous wealth to bribing
politicians, regulators, judges, and police, from the heights
of power in Washington, down to the local police precinct, to
make sure their wealth is protected and they remain immune
from criminal prosecution.

The role of so-called, “regulators” such as the Federal Reserve,
the Securities and Exchange Commission (SEC) and the Office
of the Comptroller of the Currency is to run interference for the
bankers.

They are well aware that crimes are being committed on a daily
basis, but turn a blind eye because criminality is intrinsic to the
operations of Wall Street and the profits it takes in.

There is evidence that HSBC and other major banks stepped up
their money laundering for drug cartels and other criminal outfits
in response to the financial crisis that began to emerge in earnest
in 2007 and exploded in September of 2008 with the collapse of
Lehman Brothers.

Following a similar, “deferred prosecution” deal with Wachovia
Bank in 2010 for its drug money laundering operations, Antonio
Maria Costa, who then headed the United Nations office on drugs
and crime, said that the flow of crime syndicate money represented
the only, “liquid investment capital” available to the banks at the
height of the crisis.

“Inter-bank loans were funded by money that originated from
the drugs trade,” he said.

There can be little doubt that US regulators and political leaders gave
their tacit consent to these operations as part of their rush to rescue
Wall Street from the consequences of its own money mad speculative
binge.

The incestuous relationship between bank regulators and the
banks comes into full view in the case of another recent bank
scandal.

Last week, Deutsche Bank was named by three ex-employees in
a complaint to the SEC alleging that it fraudulently concealed
$12 billion in losses between 2007 and 2009.

The Financial Times noted in passing that Robert Khuzami, the
head of enforcement at the SEC, has recused himself from the
probe because, before taking his post at the federal agency, he
was Deutsche Bank’s general counsel for the Americas from
2004 to 2009.

In other words, he was in charge of legally defending the bank at
the very time it was, according to whistle blowers, engaging in
accounting fraud.

This was also the period when Deutsche Bank and other major banks were making billions by poisoning the world financial system with toxic mortgage backed securities.

Last year, the Senate Permanent Subcommittee on Investigations
devoted 45 pages of a voluminous report on the financial crash to
the fraudulent activities of Deutsche Bank.

The report noted that the bank’s top trader in collateralized debt
obligations had referred to securities the bank was selling as, “crap”
and, “pigs,” and called the banking industry’s CDO operations a,
“Ponzi scheme.”

That such a man should be put in charge of policing the banks is,
in fact, par for the course.

The man who recommended that the Obama administration give
Khuzami the job, Richard Walker, the current chief counsel at
Deutsche Bank, was himself a former head of enforcement at the
SEC.

Last June, when JP Morgan Chase CEO Jamie Dimon testified
before the Senate on unreported losses of at least $5 billion,
sitting behind him was the bank’s chief counsel, Stephen Cutler,
who had graduated to that post after serving as SEC enforcement
chief.

This Augean stable of crime and corruption, which involves every
official institution of American capitalism, cannot be reformed.

The stranglehold of the financial aristocracy over economic life
can be ended only through the mass mobilization of the working
class to expropriate the bankers and place the major banks and
financial institutions under public ownership and democratic
control.

http://www.wsws.org/articles/2012/dec2012/pers-d14.shtml