Some banks aren't just greedy, they're criminals

The public little trusts used-car salesmen, thinks less of bankers and is dumbstruck that bankers don’t go to jail despite repeatedly breaking laws.

By HAROLD GOLDMEIER
Deutsche Bank headquarters in Frankfurt 370 (R) (photo credit: Ralph Orlowski / Reuters)
Deutsche Bank headquarters in Frankfurt 370 (R)
(photo credit: Ralph Orlowski / Reuters)
The public little trusts used-car salesmen, thinks less of bankers and is dumbstruck that bankers don’t go to jail despite repeatedly breaking laws and violating securities regulations.
Mark Twain sardonically quipped after the bank foreclosed on his home, “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.” An exasperated bank regulator blurted, “The sense of unfairness hits you between the eyes” for the soft-glove treatment bankers get, despite clear evidence of mismanagement, greed and criminal behavior.
Their seven deadliest sins, according to Gary Rivlin of the DailyBeast.com, are evicting military families from their homes during wartime, paying off loan officers to steer poor and minority borrowers to subprime loans, duping their own clients with pitches and faulty broker research to invest in high-fee securities, collaborating in the cover-up of insolvencies of Greece and other governments, ignoring Bernard Madoff’s deceptions, rigging municipal-bond markets and showering themselves with fantastic pay and bonuses.
Rivlin overlooks the nastiest sins elucidated by the former head of the UN Office on Drugs and Crime, Antonio Maria Costa, as the four pillars of international banking: drug money laundering, sanctions busting, tax evasion and arms trafficking. Politicians and academic studies evangelically avoid addressing the single-most obvious punishments: seizing bank assets and putting bankers in jail. For instance, a 2012 report from the Harvard University Institute of Politics recommends policy changes in fighting the war on Mexican cartels. The report steers away from punishments, to which the rest of us are subject, for those who facilitate illegal drug distribution and money laundering.
Swiss banks are charged and penalized for abetting tax evaders, but there is no jail time for the bankers. A British bank is charged with manipulating interest-rate benchmarks, but the banker only gets fired. British bank HSBC pays nearly $2 billion settling with the US for deferred prosecution after violating the Bank Secrecy and Trading with the Enemy Acts; their Mexican branch reportedly washes billions of dollars into cash accounts of cartels.
The fine merely totals four week’s worth of pretax profits for HSBC’s “blatant failure to implement anti-money-laundering controls,” said US Attorney Loretta Lynch. But there was no jail time for facilitating the sale of drugs to children.
Enforcers of the war on drugs tout arrests of small timers like Edward Dorsey Sr. He got five years for street-selling 5.5 grams of crack cocaine worth about $800. A 22-year-old spent 180 days in county jail and 10 years on probation for drug possession and related crimes. Two teens might go to jail for possessing Ritalin and marijuana that can be found on school kids anywhere in the world.
In contrast, Wachovia paid $160 million for laundering more than $300b. in Mexican drug-smuggling schemes.
Wachovia earned $12b. in 2009. The Federal prosecutor said, “Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations.” Not a single banker went to jail.
The Lebanese Canadian Bank settled charges in June 2013 for $102m. in penalties for a “widespread international scheme” laundering proceeds through the US banking system.
Money from drugs trafficked through West Africa went through US banks and back to Lebanese financial institutions with ties to terrorist group Hezbollah and its related entities. Lloyds Banking Group and Barclays also received fines for violating anti-drug-money laundering laws.
Coutts is a bank for the elite and monarchs of England.
Part of the Royal Bank of Scotland the government bailed out, Coutts allegedly paid millions of pounds for money laundering. American Express was once fined $65m. for laundering money through known drug dealers’ accounts. New York State fined Deloitte $10m. this past June 18 for advising one bank how to skirt money-laundering regulations.
HSBC again is in the news for laundering drug money.
The bank announced last month it is cutting staff in North Africa and Israel after it was found to be laundering money for Moroccan drug dealers.
The US Asset Forfeiture Program is the potent weapon in the arsenal on the war on drugs. The government seizes real property, vehicles, businesses, financial instruments, vessels, aircraft and jewelry when a criminal enterprise is successfully prosecuted. Governments can seize bank assets at the expense of shareholders. Put gleaming, luxury bank skyscrapers and long wooden conference tables up for sale. Prosecute individual executives and seize their personal assets. The overwhelming audacity for big paydays will quell, forcing bankers to play by the rules.
In 2008, then president of the Federal Reserve Bank of New York Tim Geithner argued “Old Testament Justice” is less important than protecting the banking system. Dr.
Seuss might ask him today if years of proteksia should not end. “Say, what a lot of banks there are. Some are sad. And some are glad. And some are very, very bad. Why are they sad, and glad, and bad? I do not know. Go ask your Dad,” Mr. Geithner.
Dr. Harold Goldmeier is the managing partner of Goldmeier Investments LLC and an instructor of business and social policy at the American Jewish University, Aardvark Israel, in Tel Aviv.