The always-solid PBS documentary series Frontline recently broadcast a good overview — titled “The Untouchables” — about the evidence that big crimes were committed by big banks during the run-up to the 2008 financial meltdown and about the fact that not a single big bank executive faced a criminal prosecution. The tired-but-true gag says that the government views the big banks as both “too big to fail” and “too big to jail.”
Testifying to a Senate committee yesterday Attorney General Eric Holder all-but confirmed that it’s so. He was responding to questions from Sen. Charles Grassley (R-Iowa) about a particular failure to prosecute, Holder said:
“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy,” he said. “And I think that is a function of the fact that some of these institutions have become too large.”
It would be good if he would state that more bluntly and suggest what he thinks should be done about it. That last bit suggests that he favors breaking up some big banks. Otherwise, he must favor letting them get away with criminal activity for the greater good.
Writing for AlterNet, Robert Borosage is among those who went into the question more deeply.
Prophetic maybe…
…and his name was Kennedy too:
When we heard the sound of the garbage man’s rattling truck coming down the alley, Mom would call to us…”Get the garbage out…here comes Kennedy!”
As my Great Aunt Berta says after perusing the Atlantic piece…”This is one fine expose; and surely too many of us were duped again; sucked in by Camelot and the Barb and Ken beautiful people image at the time. Recapturing some of the ‘attributes’ of old man Kennedy one wants to say also; like father, like sons and how power corrupts etc…”
Quite seriously, Atlantic’s story was worth a print-out, devastating my ink supply almost and ; summing up somewhat, in the paragraph:
“This approach to foreign policy was guided – and remains guided by an elaborate theorizing rooted in a school-playground view of world politics rather than the cool appraisal of strategic realities. It put__and still puts___ America in the curious position of having to uphold the very credibility that is supposed to obviate war in the first place.”
Now we have Iran with Obama/ Hegel/Kerry finding some positive wiggle room, maybe, to avoid outright war rather than being pulled by the nose or the tail into such a disaster by an overtly eager Natanyahu etc. (Asia Times on-line has a worthwhile story on this present issue, “What went wrong at Almaty” by Richard Javad Heydarian
‘We’ll just have to wait and see I suppose” Berta tells me…
It would be even more impressive
if he gave a data based analysis of why the costs of jailing financial criminals would necessarily exceed the benefits that accrued.
My apology
Wrong Eric Black story…intended for Kennedy and the Cuban crisis…one should not shovel snow and words intermitently or at the same time, no…
Can you prosecute a corporation for criminal activities?
No, you prosecute individuals for crimes.
In a modern, multi-national corporation with defined lines of authority and a set succession If the company is smart), why is the survival of a corporation jeopardized by the prosecution and potential imprisonment and/or fining of individuals within that corporation?
Is an individual too big to be prosecuted?
That is the real question, and if the answer is “yes”, there is no hope.
Individuals
The Roberts Court has ruled that corporations are individuals.
Yes
Corporations can be prosecuted for some criminal law violations (e.g. racketeering). The sanction is a fine and potential debarment from federal contracts.
I have my doubts whether fines to, or disbarment of, a corporation really have the same deterrence as a corporate officer being personally fined or actually spending time in jail.
Especially when the corporate fine is a small part of corporate profits and disbarment is rarely enforced against the largest offenders (and sometimes sole supplier).
I agree
I was just addressing the theoretical point of whether a corporation can be prosecuted for a crime.
I especially agree with your point that the penalties levied on corporate criminals are nowhere near harsh enough. Fines should be more than can be just factored in as a cost of doing business.
As an example of the non-punitive effects of corpate sanctions, last year HSBC paid $ 4.2 billion in fines for laundering drug-money over multiple years.
HSBC profits were $ 16.4 billion after fines.
Think their executives got bonuses last year?
Of course they did.
The CEO got a 33% bonus, and shareholders are getting 11% larger dividends over the next 3 quarters.
From the Rolling Stone
(quote)
… Despite the fact that HSBC admitted to laundering billions of dollars for Colombian and Mexican drug cartels (among others) and violating a host of important banking laws (from the Bank Secrecy Act to the Trading With the Enemy Act), Breuer and his Justice Department elected not to pursue criminal prosecutions of the bank, opting instead for a “record” financial settlement of $1.9 billion, which as one analyst noted is about five weeks of income for the bank.
The banks’ laundering transactions were so brazen that the NSA probably could have spotted them from space. Breuer admitted that drug dealers would sometimes come to HSBC’s Mexican branches and “deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows.”…….
….Though this was not stated explicitly, the government’s rationale in not pursuing criminal prosecutions against the bank was apparently rooted in concerns that putting executives from a “systemically important institution” in jail for drug laundering would threaten the stability of the financial system. The New York Times put it this way:
“Federal and state authorities have chosen not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in the process, endanger the financial system.”
…And not only did they sell out to drug dealers, they sold out cheap. You’ll hear bragging this week by the Obama administration that they wrested a record penalty from HSBC, but it’s a joke. Some of the penalties involved will literally make you laugh out loud. This is from Breuer’s announcement:
As a result of the government’s investigation, HSBC has . . . “clawed back” deferred compensation bonuses given to some of its most senior U.S. anti-money laundering and compliance officers, and agreed to partially defer bonus compensation for its most senior officials during the five-year period of the deferred prosecution agreement.
Wow. So the executives who spent a decade laundering billions of dollars will have to partially defer their bonuses during the five-year deferred prosecution agreement? Are you fucking kidding me? That’s the punishment? The government’s negotiators couldn’t hold firm on forcing HSBC officials to completely wait to receive their ill-gotten bonuses? They had to settle on making them “partially” wait? Every honest prosecutor in America has to be puking his guts out at such bargaining tactics. What was the Justice Department’s opening offer – asking executives to restrict their Caribbean vacation time to nine weeks a year?…
http://www.rollingstone.com/politics/blogs/taibblog/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213#ixzz2MymqM2HA
(end quote)
Corporate fines
A second’s income, shot to hell.
Too big to fail–well, thy’re barely making it now….
(quote)
…Let’s start with a bit of background. Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail.
Lately, economists have tried to pin down exactly how much the subsidy lowers big banks’ borrowing costs. In one relatively thorough effort, two researchers — Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz — put the number at about 0.8 percentage point. The discount applies to all their liabilities, including bonds and customer deposits.
Small as it might sound, 0.8 percentage point makes a big difference. Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year. To put the figure in perspective, it’s tantamount to the government giving the banks about 3 cents of every tax dollar collected.
The top five banks — JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. – – account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits (see tables for data on individual banks). In other words, the banks occupying the commanding heights of the U.S. financial industry — with almost $9 trillion in assets, more than half the size of the U.S. economy — would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders…..
http://www.bloomberg.com/news/2013-02-20/why-should-taxpayers-give-big-banks-83-billion-a-year-.html
(end quote)
As in science fiction
We’ve entered the era of corporate governance.
Neal is surely correct in his first post. There is truly no hope if an individual occupying an executive position in an anonymously-expensive corner office in some New York financial house is, indeed, immune to prosecution for his own crimes.
“Corporations have neither bodies to be punished, nor souls to be concerned, they therefore do as they like” — Edward Thurlow, Lord Chancellor, 1731-1806.
Though I’m inclined to forgive him for the omission, given the relatively innocent time in which he lived relative to corporate activity, Lord Chancellor Thurlow left out the current fact, blatantly obvious, that large corporations, whether banks or manufacturing or retail or raw-material based, have no particular loyalty or sense of responsibility toward the population or government with which they currently conduct business. Creating an economic depression is of no great consequence if money can be made, and especially so if a corrupt Congress can be persuaded that “bail-outs,” using public funds, are a necessity.
The smell from this whole years-long affair ought to be an affront to every official who really believes s/he’s a “public servant.” The financial industry, generally amoral to begin with, reeks of cynicism and corruption.
The Kenyan Muslim Socialist says no.
Holder is expressing the policy position of the top guy. The guy known among right wing circles as the Kenyan Muslim Socialist.
There is a precedent with dealing with corporate empires “to big to fail”. That is the Public Utility Holding Company Act of 1935. “PUHCA” as it became known as, was another leg in the multilegged stool of regulating banking and finance in the 1930’s. When the SEC finally got staff up, as it did by 1940, it broke up the holding company monopolies into the “integrated systems” that we came to know in the 1970’s. PUHCA was repealed in 2005 and surprise, we now have a return of these useless systems but not to the scale, as far as I’m aware of 1930 when it was found that three holding companies controlled 90% of the energy output in the country. That’s”too big to fail” and that’s what happened anyway.
The large banking systems today are all bank holding companies organized and regulated under the Bank Holding Company Act. I dare say, the Federal Reserve or the Treasury Department could administratively adopt a rule limiting the size of bank holding companies under the authority of that law. The reason that’s not being done is because the top guy doesn’t want it done. The top guy doesn’t want it done because the big bank holding companies don’t want it done. (See R. Suskind, “Confidence Men”).
The big question is, do the “too big to fail” bank holding companies, which today think they control the economy, really control things, or is it really all just a “confidence game”? Was the 2008 melt-down a big con puled off by the big players who were playing for big stakes against the suckers in Congress or was it really for real?
Hooey.
This is what happens after decades of two party “small” government ideology. People forget how large and powerful a government can be.
I don’t why so many in the media have so much trouble recognizing the historical fact that major recessions are always triggered by either war, or corporate/white collar crime waves, this is simply history. The media insistence upon portraying recessions as part of the ebbs, flows, and “cycles” of normal economies is pure propaganda. Criminal activity creates the bubbles that burst, and it always has. This why the suggestions that bubbles are good for the economy was always insane.
Now we have this ridiculous notion that arresting executives will crash the economy? These are the same executive that are creating the bubbles that are crashing the economy! How is removing them going to crash the economy more? Presumably it’s not the absence of the executive but the reaction of the bank that will hurt the economy, let’s call this what it it: a threat.
Is the same government that invaded Iraq in response to the threat of weapons of mass destruction really helpless in the face of corporate executives? Of course not. The government can take over these banks if has to. Banks have no trump card here. Too many people have just forgotten where the real power is.
Of Bigger Concern To Me
Is the politicians who are too timid to regulate. And too timid to fight for the public interest. And too tied to large contributions from wealthy and powerful interests. People who fit this description include the Clintons, Obama, and far too many Democratic Senators. They are corporate liberals; liberal on social issues, but to the right on fiscal issues. If liberals get excited about Hillary running in 2016, they should not be under any delusions that she will change the fiscal policies Democrats have been pushing for 20 years.
So….
How can politicians get elected without large donations, and the strings that come attached to them?
At one time, labor union donations provided a balance to corporate ones, but unions have become increasingly weak, and can no longer afford to do that.
Campaign financing
Paul,
This is only an insoluble problem if limit your thinking to the two party consensus. Publicly funded elections with mandatory free and equal access to all media for six months would go a long way towards erasing special interest power over candidates. As it is you can’t even get guys like Al Franken so sign off on restoring the old equal time rules that Reagan signed away back in the 80s.
We could publicly fund up to a predetermined point, qualifying candidates, and require all media provide a certain amount of air time and print space free of charge to those candidates. This would contain the costs of public financing while providing viable campaign abilities.
We already do this to some extent in MN, and that actually got Ventura elected. A candidate doesn’t need to saturate the airwaves, and campaign ads themselves can be done very effectively for modest costs with a DSLR and a good editor. Many ads are little more than power point presentations with sound.
I think public opinion is actually behind this.
Why Eric Holder protected big bank Criminals?
Attorney General Eric Holder’s admission that some banks are too big to prosecute shocked whole nation and caused unanimous criticism nationwide including Republican and Democratic Senators.
Why is Eric Holder concerned that the size of some of these institutions are so large that it will be difficult to prosecute? He says that it will have a negative impact on the national economy, perhaps even the world economy.
That is opposite! Big Banks’ financial fraud caused the largest recession in our history as well as creating the Global Financial Crisis. The Attorney General Eric Holder’s passivity allows continued Big Bank Criminal Behaviors to go unstemmed. This will result in an economic disaster of catastrophic proportions. Only quick and aggressive actions to punish and stop big bank’s criminal practices can protect our economy from further financials crisis.
What is Eric Holder’s motivation to not prosecute those big banks? It sounds laudable but in fact is it? Could there is another reason as to why he does not act in the best interest to alleviate the negative and fraudulent banking practices?