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Q: “When Did You Last Take a Wall Street Bank to Trial?” (A: “…”)

Yesterday Senator Elizabeth Warren sat on her first Banking Committee Hearing. Awesome. At least this seven minutes was, minus the part when anyone talks but her. She asked a bunch of regulators when the last time they took Wall Street banks to trial. No one answered properly. (“We have not had to do it as a practical matter to achieve our supervisory goals.”). Warren asked a few more people a few other ways, still got no answer (“I can look that up”) and then followed up with this:

“There are district attorneys and U.S. attorneys who are out there everyday squeezing ordinary citizens on sometimes very thin grounds and taking them to trial in order to make an example, as they put it. I’m really concerned that too big to fail has become too big for trial. That just seems wrong to me.”

Killed it. Killllleeeedddddd it. (Killed it.)

What Kind of Trouble Can the Banks Stir Up?

And these are things that have only come to the surface. Who knows what other things are lurking in the shadows.

But Back to that HSBC Thing

You know that HSBC settlement? The one where the bank was knowingly laundering drug money AND YET is not facing criminal charges? It’s a week later and it’s still ridiculous, and actually it’s worse than that—it’s EGREGIOUS. I keep thinking about something Mark Greif said when I talked to him about The Trouble Is The Banks: “There is a tendency to side with people who are more organized—the banks, the people in power.” Like, it’s a BANK! It must not have done it ON PURPOSE! It must have been an OVERSIGHT?! NOPE. Two important things to read about it:

Matt Taibbi at Rolling Stone: 

“So you might ask, what’s the appropriate financial penalty for a bank in HSBC’s position? Exactly how much money should one extract from a firm that has been shamelessly profiting from business with criminals for years and years? Remember, we’re talking about a company that has admitted to a smorgasbord of serious banking crimes. If you’re the prosecutor, you’ve got this bank by the balls. So how much money should you take?

“How about all of it? How about every last dollar the bank has made since it started its illegal activity? How about you dive into every bank account of every single executive involved in this mess and take every last bonus dollar they’ve ever earned? Then take their houses, their cars, the paintings they bought at Sotheby’s auctions, the clothes in their closets, the loose change in the jars on their kitchen counters, every last freaking thing. Take it all and don’t think twice. And then throw them in jail.

“Sound harsh? It does, doesn’t it? The only problem is, that’s exactly what the government does just about every day to ordinary people involved in ordinary drug cases.”

Neil Barofsky at Naked Capitalism: 

“Why no criminal charges? Why instead only some remedial measures and a “historical” fine that can be measured in weeks — not years — of earnings? It certainly wasn’t for lack of evidence. No, instead the government determined that HSBC is not only too big to fail, but also too big to jail. As the New York Times first reported, even though there were strong voices within DOJ pushing for criminal charges, the big banks’ best friends within the government (the Treasury Department, of course, and other unnamed regulators) were too fearful that an indictment could destabilize the global financial system. Yes, it’s 2008 all over again. In the name of systemic stability, a megabank again escapes accountability for its actions, rescued by compliant officials.”

 

The Bank and the Typo that Ruined a Man’s Life

The most tragic part of this story is mentioned in the very first sentence.

Read This Libor Story

With a tweet like that, how could you not pay attention to this Bloomberg feature on the Libor scandal?

For years, traders at Deutsche Bank AG, UBS AG, Barclays, RBS and other banks colluded with colleagues responsible for setting the benchmark and their counterparts at other firms to rig the price of money, according to documents obtained by Bloomberg and interviews with two dozen current and former traders, lawyers and regulators. UBS traders went as far as offering bribes to brokers to persuade others to make favorable submissions on their behalf, regulatory filings show.

Members of the close-knit group of traders knew each other from working at the same firms or going on trips organized by interdealer brokers, which line up buyers and sellers of securities, to French ski resort Chamonix and the Monaco Grand Prix. The manipulation flourished for years, even after bank supervisors were made aware of the system’s flaws.

“We will never know the amounts of money involved, but it has to be the biggest financial fraud of all time,” says Adrian Blundell-Wignall, a special adviser to the secretary-general of the Organization for Economic Cooperation and Development in Paris. “Libor is the basis for calculating practically every derivative known to man.”

It’s the biggest financial fraud of all time, yet the general public finds it it too boring? complex? to really give it the attention it deserves. So let’s put this story on our reading lists today.

Update: Heidi’s newest column is about how nobody cares about Libor:

…there is literally no one in the United States who has ever pounded a dinner table in outrage over government complacency, yelling, “But if we’re so tough on financial crime, why haven’t we thrown those obscure Asian bureaucrats of a foreign bank into the slammer for fixing a London-based interest rate?!”

No. What US consumers wanted was the prosecution of American banks, for American crimes. Insider trading. Mortgage fraud. Foreclosure abuses. Unjust, overdone compensation for executives and managers who failed to uphold ethical business standards.

Post Bailout Thank You

In response to AIG’s post-bailout fuck you (PBFY), Heidi N. Moore takes a look back at the “post-bailout thank you (PBTY)” advertisement. (“This genre requires stirring music, lots of pictures of noble municipal statuary in big cities, and weighty reminders of the ineffable beauty of the American embrace of progress.”)

Our Woman in the Senate Banking Committee

Elizabeth Warren v. the banks.

‘How many billions of dollars do you have to launder for drug lords before somebody says, we’re shutting you down?’

Senator Elizabeth Warren does it again: “If you’re caught with an ounce of cocaine, the chances are good you’re going to go to jail. If it happens repeatedly, you may go to jail for the rest of your life. But apparently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night. Every single individual associated with this. And I think that’s fundamentally wrong.”

Matt Levine on Investment Bankers

Matt Levine's most recent "Ask a Banker" column for Planet Money is one of the best things to read right now, and I'm kiiiiind of jealous we couldn't snap him up to do a column for us.

Why Trust Banks?

The Atlantic's cover story for January and February is this really terrific piece that looks at the immense lack of transparency that banks have when it comes to how, why, and where banks are investing money, and how a recent slew of criminal activity banks have engaged in in the past couple of years (remember LIBOR? Or HSBC helping drug dealers launder money?) have caused not only the general public to lose their trust in banks, but elite investors who have the power to move markets as well.

Fees Waived Because of Hurricane, But Not Because They’re Evil and Wrong

Miranda Popkey received a KIND AND GENEROUS email from her bank last night: