It’s Good To Be Too Big To Fail

So, HSBC is going to have to cough up almost $2 billion for, in effect, running a massive money-laundering operation that helped fund such luminary do-gooders as the Iranian government and Mexican drug gangs. But the U.S. has decided not to throw the cuffs on the British bank because, well, that would be pretty hard. And could create an awful lot of collateral damage that no one needs as the country careens off the fiscal cliff.

While the settlement with HSBC is a major victory for the government, the case raises questions about whether certain financial institutions, having grown so large and interconnected, are too big to indict. Four years after the failure of Lehman Brothers nearly toppled the financial system, regulators are still wary that a single institution could undermine the recovery of the industry and the economy.

But the threat of criminal prosecution acts as a powerful deterrent. If authorities signal such actions are remote for big banks, the threat could lose its sting….

A money-laundering indictment, or a guilty plea over such charges, would essentially be a death sentence for the bank. Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its charter to operate in the United States, officials said.

Not everyone agrees with the Justice Dept.’s namby-pamby handling of the rogues at HSBC, including Forbes’ Haydn Shaughnessy.

It’s a familiar argument—too familiar. But the actions of prosecutors risk undermining the broader social system, with even more serious consequences.

More serious that global economic collapse and a great deal of vacant office space in London? To the barricades!

The underlying moral issue will not easily be wished away….

People are no longer looking for closure on this crisis. It is, instead, a springboard for a new social and political movement. That movement argues quite reasonably that not enough good came of the victory of capitalism over socialism. One way to fan that fire is to continue treating the banks as a privileged class.

HSBC to Pay $1.92 Billion to Settle Charges of Money Laundering [DealBook]
HSBC to pay $1.9B to settle money-laundering case [AP]
Too Big Too Indict, HSBC, Barclays and UBS Set Ugly Precedent [Forbes]

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2 Responses to “It’s Good To Be Too Big To Fail”

  1. B Iteme says:

    I particularly like the news story that disclosed that the bank had special sized metal boxes for holding cash that were given to (drug lord) customers that were designed to be easily passed into the tellers' window slot. Nothing like customer service.

  2. Guest says:

    "More serious than global economic collapse…"

    Fixed it for you.