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US Justice Department’s Bank Fines are Misplaced

Posted by Steve Markowitz on December 11, 2012

CNNMoney has reported on a giant stettlement between HSBC bank and the United States government.  According to the report, HSBC will pay a fine of $1.92 billion for infractions that include money laundering for drug cartels and violation of other US laws for doing business with the likes of rouge nations Iran and Libya.

The DOJ/HSBC settlement adds to a growing list of banks that have paid fines relating to illegal banking activities.  This includes:

Standard Chartered – Paid over $320 million to settle similar money laundering charges.

ING – Paid over a $610 million for illegally serving Cuban and Iran.

Wachovia Bank – Paid $160 million relating to laundering money for the Mexican drug cartel.

Credit Suisse – paid over $530 million concerning its business with Iran and others.

While $1.92 billion settlement is large, it is only a bit more than 10% of HSBC’s 2011 total profits.  In announcing the HSBC settlement, N.Y. Assistant Attorney General Lanny Breuer said: “HSBC is being held accountable for stunning failures of oversight. The record of dysfunction that prevailed at HSBC for many years was astonishing.”  This suggestion is nonsense. The perpetrators of the illegal acts are not being held accountable.  While the HSBC shareholders pay a rather trivial fine, the individuals who broke US laws are neither being personally fined nor criminally prosecuted.  Until such appropriate criminal actions are taken, executives of these banks will continue to flaunt American law

There is an incestuous relationship between governments and large international banks.  When the 2008 financial crisis hit, the American government and others justified bailing out mega banks with the claim that “they are too big to fail.”  The implication was that should these banks fail, greater economic calamities will result for society.  This logic must be questioned given the fact that those large banks have been allowed to become substantially larger in the past four years.  The government’s more recent settlements with the same large banks over illegal practices support this incestuous theory.


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