HSBC Busted! (Sort Of) Revisit “Fast and Furious”!

So the news is out that the European bank HSBC is paying a record $1.9 billion settlement to US authorities for laundering drug money. Of course, it is rarely stated that way. Instead you get a lot of passive language. Take the Chicago Tribune story:

“U.S. prosecutors… accused Europe’s biggest bank of failing to enforce rules designed to prevent the laundering of criminal cash.”

“HSBC Holdings Plc admitted to a breakdown of controls…”

“We accept responsibility for our past mistakes…”

“The Senate panel alleged that HSBC failed to maintain controls designed to prevent money laundering…”

Let me simplify this last one: “failed to maintain controls designed to prevent money laundering” is a lot of verbiage for saying HSBC laundered money.

“The bank was unable to properly monitor $15 billion in bulk cash transactions between mid-2006 and mid-2009, and had inadequate staffing and high turnover in its compliance units, July’s report said.”

Right. The poor bank wasn’t able to do it. That $15 billion in bulk cash just slipped through inadequate staffing. If you believe that, please contact me about some amazing real estate investment opportunities.

I scanned several of these stories and none of them bother to give any real background to the concept that banks stay in business by laundering drug money. The Chicago version doesn’t even tell you what the LA Times reveals: “The report also blamed U.S. regulators, claiming they knew the bank had a poor system to detect problems but failed to take action.” So there was government collusion.

The closest to the truth came from the New York Time’s Dealbook. It made some fascinating points that ought to start a firestorm:

“State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system… the case raises questions about whether certain financial institutions, having grown so large and interconnected, are too big to indict.”

So, if you’re the CEO of a local bank, and get tempted to take a few million from a narco trafficker, you can expect a life in a cage dealing with homosexual rapists. But if you’re a VIP Big Banksta, you get to go ahead and try to boost your capital. Maybe you’ll get away with it. If you pay a penalty, it will be years in the future. And who’s to say that penalty will surpass the profits?

Indeed, banks are constantly laundering narco money. Consider this website for J. P. Morgan which hosts the essay “The Price of Globalization.”  The article quotes two sources approvingly who claim that the banks launder a five hundred billion to a trillion dollars a year in drug money, and that US banks deal with about half of it. You seriously think any “too big to fail” US bank is going to start turning away that sort of business?

It gets even better (and by “better,” I mean worse). The Guardian/Observer ran a story in December 2009, that “Drug money saved banks in global crisis, says UN advisor.”

“Drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis, the United Nations‘ drugs and crime tsar has told the Observer. Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organized crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.”

So this brings us right back to the “too big to indict” claim mentioned in Dealbook. “Godfather Politics” is not just the name of this great blog. It is also a reasonable description of modern governments as virtually branches of organized crime.

This is why “Fast and Furious” needs to be investigated thoroughly, but not as an operation that was “botched.” It should be investigated as a real attempt to give weapons to a favored drug cartel. A lot more could be said, but I’ll leave you with the following two videos from a local Fox News television journalist for the last word.