Is the lucrative revolving door the reason why government treats the banks with kid gloves?
But if so, at what cost to the rest of us?
A man who once worked for a big investment bank, Citigroup, Jack Lew, the president's former chief of staff, was recently picked to be the new Treasury Secretary. Mary Jo White, the newly named head of the SEC (Securities and Exchange Commission), was a chief litigator at a top law firm representing big investment banks like Morgan Stanley. But how will these folks deal with corruption and crime at big investment banks, like that laid out in the next couple of paragraphs, when in all likelihood both these people will be returning to very lucrative employment with such banks or the law firms that serve them?
The HSBC settlement was a shocking new low in the history of the too-big-to-fail issue.
HSBC was a serial money launderer. They had been twice given formal cease-and-desist orders by the government (one dating back as far as 2003, another one in 2010) for "inadequately policing the accounts" in their system. Translation: They laundered more than $800 million for drug cartels in Colombia and Mexico. They also laundered money for terrorist-connected banks in the Middle East, and also for Russian gangsters. Basically they broke every law in the book by servicing, aiding and abetting every kind of big-time criminal you can possibly imagine. And except for the relatively small fine they had to pay, they got off scot free. Total amount of criminal proceeds laundered: $1.9 billion. But there were no criminal charges whatsoever, and not even any individual fines, which is dumbfounding.
The LIBOR price fixing conspiracy
This was perhaps the biggest financial crime of all time. Some of the world's biggest banks got together and conspired (illegally) to artificially rig the global interest rates which are based on the London inner bank offered rate, which is a rate that determines how much it costs banks to lend money to each other.
This LIBOR rate affects the prices of hundreds of trillions of dollars of financial products. It applies to everything from credit cards to mortgages to municipal bonds. Basically everything in the world has a price that is somehow connected to the LIBOR rate. And these guys were monkeying around with this for their personal profit and for that of their buddies. But once again there were no criminal charges, which is again dumbfounding.