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Too Big To Even Name

by John Rubino on October 20, 2013 · 19 comments

With the announcement that JP Morgan Chase will pay a $13 billion fine for past crimes against its customers – while the bankers who actually committed the crimes will remain not only unprosecuted but unnamed – a lot of people are wondering how it is that crimes worthy of billions in restitution don’t rate a single perp-walk. Earlier this year a senator wondered the same thing in a hearing and got some illuminating answers. From Harper’s Magazine:

Too Big To Jail
From the transcript of a March 7 Senate Banking Committee hearing on enforcement of the Bank Secrecy Act of 1970, which requires U.S. financial institutions to help the federal government prevent money laundering. Elizabeth Warren is a Democratic senator from Massachusetts; David Cohen is the Treasury’s undersecretary for terrorism and financial intelligence; Jerome Powell is a governor of the Federal Reserve.

ELIZABETH WARREN: In December, HSBC admitted to laundering $881 million for Mexican and Colombian drug cartels, and also admitted to violating our sanctions against Iran, Libya, Cuba, Burma, the Sudan. They didn’t do it just one time. It wasn’t like a mistake. They did it over and over and over again over a period of years. And they were caught doing it. Warned not to do it. And kept right on doing it. And evidently making profits doing it. Now, HSBC paid a fine, but no one individual went to trial. No one individual was banned from banking. And there was no hearing to consider shutting down HSBC’s activities here in the United States. So what I’d like is — you’re the experts on money laundering. I’d like your opinion. What does it take? How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this? Mr. Cohen, can we start with you?

DAVID COHEN: Certainly, Senator. No question, the activity that was the subject of the enforcement action against HSBC was egregious. For our part, we imposed on HSBC the largest penalties that we had ever imposed on any financial institution. We looked at the facts and determined that the appropriate response there was a very, very significant penalty.

WARREN: But let me just move you along here, Mr. Cohen. What does it take to get you to move toward even a hearing? Even considering shutting down banking operations for money laundering?

COHEN: Senator, we at the Treasury Department don’t have the authority to shut down a financial institution.

WARREN: I understand that. I’m asking, in your opinion, you are the ones who are supposed to be the experts on money laundering. You work with everyone else, including the Department of Justice. In your opinion, how many billions of dollars do you have to launder for drug lords before somebody says, “We’re shutting you down”?

COHEN: We take these issues extraordinarily seriously. We aggressively prosecute and impose penalties against the institutions to the full extent of our authority. And one of the issues that we’re looking at —

WARREN: I’m sorry, I don’t mean to interrupt. I just need to move this along. I’m not hearing your opinion on this. Treasury is supposed to be one of the leaders in how we understand and work together to stop money laundering. I’m asking, what does it take, even to say, “We’re going to draw a line here, and if you cross that line, you’re at risk for having your bank closed”?

COHEN: We will, and have, and will continue to exercise our authority to the full extent of the law. The question of pulling a bank’s license is a question for the regulators.

WARREN: So you have no opinion on that? You tell me how vigorously you want to enforce these laws, but you have no opinion on when it is that a bank should be shut down for money laundering? Not even an opinion?

COHEN: Of course we have views on —

WARREN: That’s what I asked you for. Your views.

COHEN: I’m not going to get into some hypothetical line-drawing exercise.

WARREN: Well, it’s somewhere beyond $881 million of drug money.

COHEN: Well, Senator, the actions that we took in the HSBC case we thought were appropriate in that instance.

WARREN: Governor Powell, perhaps you can help me out here?

JEROME POWELL: Sure. So the authority to shut down an institution or hold a hearing about it, I believe, is triggered by a criminal conviction. And we don’t do criminal investigation. In the case of HSBC, we gave essentially the statutory maximum civil money penalties. We gave very stringent cease-and-desist orders. And we did what we have the legal authority to do.

WARREN: I appreciate that, Mr. Powell. So you’re saying you have no advice to the Justice Department on whether or not this was an appropriate case for a criminal action?

POWELL: It’s not our jurisdiction. They don’t do monetary policy. We collaborate with them, and we did on HSBC. They ask us specific questions. We answer those questions. That’s what we do.

WARREN: So you are responsible for these banks, but you have no view on when it’s appropriate to consider even a hearing to raise the question of whether or not these banks should have to close their operations when they engage in money laundering for drug cartels?

POWELL: I’ll tell you exactly when it’s appropriate. It’s appropriate where there’s a criminal conviction.

WARREN: I’ll just say here, 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 evidently 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. I think that’s fundamentally wrong.

Some thoughts
When the Savings & Loan industry gorged on junk bonds and self-dealing and imploded in 1990, the Justice Department sent hundreds of industry insiders to jail and fined hundreds more. This time around, has anyone gone to jail? Apparently not. A cynic might say that Treasury, Justice and the Fed now operate more like in-house council for Wall Street, cleaning up messes and negotiating settlements that keep the deals flowing without touching the deal makers.

This isn’t hyperbole. It is now generally accepted that a stint in congress or a regulatory agency is an extended job interview, giving the lobbying firms and big banks a chance to look you over and see if you’re a team player. So negotiating a fig-leaf settlement is a sign of initiative, while going after individual bankers upsets your future bosses and dramatically lowers your long-term earning potential. Hence the unwillingness of Powell and Cohen to state obvious truths.

On the other hand, the increasing size of the fines seems to indicate that something has changed. Maybe, having won re-election, the president is thinking more about his legacy and less about ad spending, and is willing to forego some of Wall Street’s millions in order to seem tough on the banking aristocracy. Wonder what the democrats who do have to run for election think of this sudden change?

But if legacy is the motivating factor here, the strategy is failing, because the size of the fines only serves to illustrate the magnitude of the crimes – and the outrageousness of letting the actual people who committed the crimes go untouched and unshamed.

  • QEternity

    It’s like a parasitic criminal conspiracy. The banksters act as parasites in the real racon ony, sucking the life out of it. Then the government comes along for it’s periodic ‘cut’, but fails to eliminate the parasite. By ensuring the parasite continues to exist, and jailing no one, the government itself becomes a parasite on the parasite.

    • whateverdude

      “The law perverted! And the police powers of the state perverted along with it! The law, I say, not only turned from its proper purpose but made to follow an entirely contrary purpose! The law become the weapon of every kind of greed! Instead of checking crime, the law itself guilty of the evils it is supposed to punish!

      If this is true, it is a serious fact, and moral duty requires me to call the attention of my fellow-citizens to it.”

      – Bastiat, The Law

  • bestgolfgear

    I think it would be well to ask cui bono in this case. Who else would not want these bankers to be put on trial or plea bargain out of a prison sentence?

  • David Zuniga

    Oh, come now, John. Since 1862, Congress has been blatantly, remorselessly counterfeiting the U.S. Dollar — and this with SCOTUS sanction since 1871. Not one “U.S. Dollar” manufactured today is lawful U.S. money, according to the U.S. Constitution.
    This shameless organized crime cartel operating under the “U.S. Congress” label is so openly, arrogantly criminal. No, worse than that; it is *criminogenic*, causing our lowlier ‘public servants’ to thumb their nose at laws, as well. Why would you think they’d take action against their handlers?
    Definitive, 10-point communism has been Washington D.C.’s policy arguably since the Woodrow Wilson era; with FDR and beyond, even the pretense of rule of law was out the window.
    It isn’t too big to name; as Tom DiLorenzo’s eponymous 2012 book does in every chapter: Congress is organized crime. Now, its arrogations and crimes are unalloyed; open, and even a source of pride, occasionally.
    How to stop organized crime? Law enforcement. The first of the 19 AmericaAgain! Legislative Action reforms is to bring all members of Congress home, to office in their state capitol or district offices, which we already provide for them, staffed and operational all year long, even in their imperial absence. Real-time multiplexing virtual meeting technology makes it a simple matter for them to perform every constitutional duty, meeting, hearing, and vote right from their home office — away from their cronies, and more importantly, where we can watch them.
    The Constitution (see Amendment XX, Section 2) only requires that Congress meet all together once per year, for an indeterminate period of time — could be just a day or two! — beginning at noon on January 3, annually. We can have them conduct their most pressing annual face-to-face business in, say, ten days in January, then come home for the rest of the year.
    That is only one of 19 reforms that AmericaAgain! plans to force through passage, using the AmericaAgain! Indictment Engine(TM) as our big stick against individual members of Congress, in STATE criminal courts.
    Here in Texas, we have done this once already — to Tom DeLay, the second-highest-ranking member of the US House of Representatives. Convicted of two counts, financial crimes that were infinitesimal compared to Congress’ long-term financial crimes operations.
    What will it take to bring about this turning of the tables in America? Given today’s regnant ignorance and apathy, likely it will require that Great Depression II first shake this population out of its silly television-sports-hobbies-vacations trance, into pain, desperation, and righteous anger.
    Restoring the U.S. Constitution’s strictures on the criminogenic D.C. horde would not require even 1% of the population, if we are tactically wise. The laws are in place, and the idea is actually quite old; it’s ironically Alexander Hamilton’s (see his Federalist 28).
    Until the ‘great reset’ comes, I think this frog will continue to roast in an increasingly brazen kettle of D.C. crime.

    • dennykray


  • FreeOregon

    This is like civil forfeiture without trial, a means of funding “law enforcement” that fails to prevent crime. Bureaucrats gotta eat too!

    The size of the fines show the present limits of government’s panic to find funding. Having gutted the real economy, Government’s desperation will only grow.

    These fines reward the regulators who failed to prevent the so-called infractions. They do nothing to prevent future infractions. The system is so complex and so dysfunctional, the outstanding junk paper so huge it defies imagination. Effective regulation is not possible.

    $13 billion is a drop in the bucket. What’s really needed is to put JPM into liquidation and out of its misery. But then, since JPM’s “the FED’s bank” that would put the FED and the US Treasury into liquidation as well.

    Were there any victims, apart from JPM shareholders who sustained losses? How about people who lost their homes or their life savings? Did anyone even consider making those people whole? If not why not?

  • John Law

    I think the reasons for the big fines is pretty simple,the government os broke and needs the money. They saw their opportunity and they took it. Why should they care about justice for the perps when they can just ring the cash register?

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  • esqualido

    The stage was set when President Obama selected for Attorney General the very man who had voted to pardon the greatest financial criminal to come down the pike before Bernard Madoff. The Axis-of-Evil has got nothing on the Axis-of-See-No-Evil

  • Tony D

    When I saw the title I expected this to be about the suppression of PM prices by TPTB

    How PM prices can be where they are in the current QE is quite astounding, The fact that the media doesn’t question this says a lot about their motives and/or intelligence.

    • pipefit9

      The explanation that makes any sense to me is that China has agreed to go slow on buying up every non-USA gold miner out there in exchange for low gold prices.

  • pipefit9

    I’m surprised that you’re surprised. And even more surprised that anybody thinks that $13 billion is a big number.

  • hellbentgerbils

    Gov is rotten at it’s core……………
    It has been infiltrated by the worst types of sociopaths….
    just look who is leader of the free world…a rodeo clown.

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  • Jim Clark

    Shouldn’t Senator Warren be asking Attorney General Holder these questions? Or is this a dog and pony show to help Holder escape?

  • makeupdiva

    there needs to be an entire overhaul of who runs our banks – rule of law should apply and these crooks needs to go

  • pup


  • DaveZiffer

    So this seems pretty simple to me. When JP Morgan execs pay $13B in fines, they are simply paying their investors’ money to their cronies in Congress. They probably couldn’t care less and regard it as a mere cost of doing business. JP understands that Congress needs a whipping boy now and then and is more than happy to take its turn playing the role. It is a drop in the bucket in comparison to what they get in return, and I can almost imagine all of them laughing about what a great media play it is. But if you put a JP Morgan exec in jail, things get personal. The exec will be giving up his own personal time and will have his own name sullied. Such an exec might be easily induced to turn in evidence against his congressional buddies who are no doubt equally culpable and jail-able. The criminals in Congress might just be incapable of restraining a criminal investigation. Hence you will never see a prosecution of anyone at this level.

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