
Bankers now Too Big to Jail - jmah
http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214
======
JumpCrisscross
Reading Taibbi as someone in finance is like watching Bravo's Silicon Valley
for much of HN. It's hyperbolically relatable in a way that makes you laugh
but simultaneously grimace-inducing as you realise how mis-informative it is
to someone without prior knowledge.

Take HSBC. Yes, it is a cock up of grand proportions to allow Iranian money
anywhere _close_ to your American subsidiary. And yes, everyone involved in
the Libor scandal should go to jail (as I expect many of them will).

Then one notices that this was largely trade financing for buyers in India,
Greece, and South Korea. HSBC, like Standard Chartered, grew out of a
tradition of giving a great deal of independence to country offices. Sort of
like IBM. This increases flexibility but makes miscommunication more likely.
Anti-money laundering is hard and margin compression at banks has thinned
compliance teams. Financing terrorism suddenly becomes something more banal -
a zealous banker shifting records around for a client he may have known from
pre-revolutionary days (Iran was a U.S. ally until the 1979 revolution).

Does this excuse the behaviour? No. But it certainly dulls my pitchfork. Just
as I avoid Fox News to stay abreast of American politics I would encourage you
to seek out sources chasing understanding. Then again, a good outrage isn't a
cheap good either :).

~~~
rpm4321
Thank God this is at the top of the page. I'm always shocked to see Taibbi get
so much attention on HN. I would take his commentary about as seriously as I
would any other polemicist of the Glenn Beck / Michael Moore variety.

~~~
rayiner
I've found that opinions that run contrary to the group leanings often do well
on HN. Its still a pretty intellectually curious place.

------
mcphilip
It amazes and depresses me that it takes bad behavior on a level that is
easily explainable (i.e. help terrorist launder money) for people to get upset
at how untouchable large international financial institutions have become.

The LIBOR scandal is so much bigger and more important than this HSBC case but
it seemingly gets a pass from public outrage since there's no easy TL;DR
explanation of it.

~~~
jrockway
Libor TLDR: "Organizations set their interest rates to a random number that
some banks came up with. The banks changed how they came up with the number
without telling anyone, and the organizations got mad because it caused them
to lose money while the banks made money."

~~~
dllthomas
Libor TLDR: "Fraud."

~~~
mtgx
I don't think that's enough to make people understand whether the governments
should just fine them or that they need to put hundreds of people in jail.

~~~
dllthomas
Fraud is a crime. When it involves enough money (amount depending on
jurisdiction) people are supposed to go to jail. It is my understanding that
the amounts involved here were significantly above those required for any
jurisdiction.

------
callmevlad
This related hearing [1] led by freshman senator Elizabeth Warren is eye-
opening. She can't get a straight answer on the last time a major bank was
taken to trial over its offenses.

[1]
[http://www.dailykos.com/story/2013/02/15/1187417/-Elizabeth-...](http://www.dailykos.com/story/2013/02/15/1187417/-Elizabeth-
Warren-to-bank-regulators-When-was-the-last-time-you-brought-Wall-Street-
banks-to-trial)

~~~
tptacek
She does get a straight answer. Regulators don't sue; they have a steady-state
relationship with the banks where their concerns are addressed with consent
decrees. Lawsuits are insanely expensive in the best of cases, but they're
worse when you're suing a megabank, because the suit impacts the broader
economy.

It is a little disingenuous for Warren to act surprised about this. She knows
not only why regulators don't sue, but also how unlikely it is that we're
going to start doing that (it'd be economically irrational for us to do so).

Her heart is in the right place. Too Big To Fail is a real problem. But if
you've got a bunch of wasp nests in your back yard, you don't fix the problem
by jamming sharp sticks into them.

~~~
Cushman
That's a little uncharitable. It's obvious that Senator Warren's real question
is: Do the banks have any reason to feel as if they face a threat of real
legal action if they break the rules?

If not, that's surely something we can and should change.

~~~
chetanahuja
s/break the rules/break the laws/

Completely different meaning. If ate a bar of chocolate in the library despite
posted signs against eating and drinking. I broke a rule. If I threw my
chocolate bar at the librarian's face with an intent to injure him, I broke a
law (assault and injury etc.)

~~~
Cushman
And if there wasn't _anything_ you could do to land yourself in court,
wouldn't you start to wonder if there are any real laws at all?

~~~
chetanahuja
Oh there's no doubt that laws were and are being broken by top banks every
single day. The problem is that they have enough concentration of power on
their side (in most western countries) that it's almost impossible for the
feeble democratic institutions to effectively punish them.

------
bsims
About 8 years ago an investor in my first company was defrauded by a con
artist. This led me on a crazy 4 year chase which resulted in the discovery of
a series of pump and dump stock frauds worth over $1 billion (think Enron,
divided into smaller pieces) and possible ties to terrorism. This was a result
of class action lawsuits, SEC investigations etc. None of which resulted in
any type of jail time, and one of the individuals lives nicely in a 20 bedroom
mansion in Barbados.

The sad part about all of this, was that I notified the SEC on multiple
occasions with physical proof that people were defrauding the government and
individuals. The SEC's responsibility wasn't "to handle foreign citizens."
Homeland Security "didn't handle securities cases." The IRS needed the
person's Social Security Number, name and address. When someone moves from one
state to another, the states stop communicating on any type of prosecution.

The whole process was a fascinating/scary insight into how easy it is to
commit fraud in the United States.

So as a word to the wise for first time entrepreneurs, don't be afraid to ask
investors, VCs or others where their money comes from.

~~~
dbcooper
Please write a blog post on this!

~~~
bsims
Will do. Mind being a second set of eyes on it?

~~~
bsims
Third set of eyes would be helpful.

The most difficult part will be figuring out how to condense it down.

------
ohazi
> "Had the U.S. authorities decided to press criminal charges," said Assistant
> Attorney General Lanny Breuer at a press conference to announce the
> settlement, "HSBC would almost certainly have lost its banking license in
> the U.S., the future of the institution would have been under threat and the
> entire banking system would have been destabilized."

Corporations don't commit crimes, people do. Executives employed by this
company were responsible for all of the illegal activities that this story
describes. They get paid a shitload of money because they take risks on behalf
of the company and are supposed to be responsible for the results of those
actions. When they perform well, they get a huge bonus. When they don't, their
punishment is that they get "only" their salary and no bonus. Fine, whatever.
But when they authorize actions that are _clearly_ illegal, _they should go to
jail_.

The attorney general should be finding the responsible executives and
prosecuting them. If the company doesn't cooperate, then throw the board in
jail. The company can then hire/elect replacements who will be properly scared
shitless of doing anything illegal. These guys are supposed to be compensated
for the risks that they take. You can't have a multi-million dollar (personal)
upside and no comparable downside. In a just society, the downside needs to be
that if you're caught breaking the law, _you go straight the fuck to jail like
everybody else_.

If you don't make people personally responsible for their actions, you're
effectively giving them a blank check to do whatever the hell they want and
then hide behind an operation that won't be touched because it's too big to
fail. You also have employment contracts that require the corporation to pay
legal fees and use their enormous resources to protect them from personal
liability.

Obviously there are situations when a company needs to defend its executives
in order to conduct normal operations, but the line in the sand needs to be
drawn at accusations of criminal behavior.

~~~
camus
> Corporations don't commit crimes, people d

but but corporations are people ?!? they said

------
cperciva
There are some very obvious issues here, like the deliberately un-investigated
SARs; but I'm inclined to side with HSBC in some places here. Where
transactions with and accounts held by persons or countries against whom the
US has sanctions in place are concerned, I think HSBC was entirely correct in
saying "these accounts aren't in the US, so we're not going to report them to
the US government". The US government has the power to regulate banking in the
US... not throughout the entire world.

~~~
pyre
But doing things like purposely obfuscating money flowing between the US and
Iran as a middle man to get around sanctions?

~~~
jacquesm
Banks are not in charge of policing the world. If the US wants to stop
funds/goods from leaving/ending up in Iran they should stop those funds/goods
from entering/leaving the US in the first place.

~~~
pyre

      | Banks are not in charge of policing the world.
    

I never claimed that they were. If HSBC wants to transfer money between (e.g.)
Turkey and Iran, then the US has no say, even if they don't like it.

    
    
      | If the US wants to stop funds/goods from
      | leaving/ending up in Iran they should stop those
      | funds/goods from entering/leaving the US in the
      | first place.
    

This is a straw-man. I'm not talking about attempting to prevent _every
possible thing that ever leaves the US from ever entering Iran under all
possible circumstances._ That's obviously impossible.

The article paints a picture that HSBC provided the service of routing money
around so that people in Iran could transfer money to the US and vice versa.
The entire purpose of this service would be to obfuscate the origin or
destination of the transfer from the US government.

I wouldn't say that requiring HSBC to not do this would be requiring them to
'police the world,' but if they want to be chartered as a bank in the US, it
certainly makes sense that they should 'play by the rules.' If they were
specifically offering/advertising a service to clients where-by they would
actively skirt those rules, it doesn't seem like there is an issue with (at
the least) revoking their charter.

~~~
jacquesm
> if they want to be chartered as a bank in the US, it certainly makes sense
> that they should 'play by the rules.'

It appears they are not doing that and it appears their charter won't be
revoked.

The point I tried to make was that no matter what you do to restrict such
transactions from happening, they _will_ happen. The only people that suffer
from sanctions are the poor, the rest will continue underground.

If you want to play global policeman and if you want to limit access to
goods/funds for some country you have but one option, to close your borders.
Once stuff leaves your sphere of influence anything can happen, and making it
illegal to do something typically has only one effect, it will drive up
prices.

HSBC saw an opportunity to make money, and being a bank they acted on it and
did not care about the consequences. If you want to make a principled stand
then yes, by all means have their US banking charter revoked and jail their
execs. But if you don't do that then this will simply repeat, different names,
different labels same principle.

Having principles costs, sometimes it costs a lot.

~~~
pyre
W.R.T. HSBC not being punished, you're preaching to the choir here.

------
InclinedPlane
If you want to commit a white collar crime make sure that it involves stealing
or laundering billions of dollars through the banking system rather than
downloading journal articles that are ostensibly in the public domain.

------
clicks
This is pretty incredible.

I remembering reading about this way early on... and cast it aside as some
false hyped up story.

Then I saw it being reported by high profile journals...

The biggest banks in the world are aiding terrorists and drug dealers do their
work in the most crucial way: handling the financial end of things.

Isn't that just absolutely absurd? I don't know what to think at this point.

~~~
Drakim
We should stop talking about this immediately and focus on the real issues
like arresting Julian Assange for aiding the enemy, several of the things he
leaked could potentially be used by the enemy in some way, somehow.

~~~
pstuart
I was tempted to add to the sarcasm thread but I'll save that for reddit.

A key problem here is getting and maintaining attention by a significant
majority of the population. Depressing information like this, coupled with the
sense of powerlessness turns people off and relegates stories like this to the
politically aware fringe of society.

The Daily Show and Colbert Report seem to have the right approach, but they
are not enough.

I have an idea for a start-up that could do interesting things with this
notion, but between time contraints and not having a partner in crime I fear
it will never happen.

~~~
bbatsell
> Depressing information like this, coupled with the sense of powerlessness
> turns people off and relegates stories like this to the politically aware
> fringe of society.

Even as a fairly politically-active person, I succumb to this exact sense of
powerlessness. It's absolutely the key problem.

> I have an idea for a start-up that could do interesting things with this
> notion, but between time contraints and not having a partner in crime I fear
> it will never happen.

If you're comfortable sharing, I would love to hear it. It's a problem domain
that really needs some attention and effort.

~~~
pstuart
I know ideas are a dime a dozen and that it's execution that matters but it's
hard for me to share on a site like HN.

I'll send it to you directly for feedback, etc.

Essentially it's about using social media in a different fashion then
currently done (i.e., social broadcasting), humor, mockery, ego, shame,
titillation and story telling.

------
saosebastiao
Matt Taibbi? I agree with his general point of view, but it is amazing that
people still consider him a journalist. It appears he has mastered the art of
making smears look like journalism.

~~~
nhebb
Raise your hand if you guessed that it was Taibbi before clicking the link.

~~~
harryh
_raises hand_

------
anonymfus
>"Had the U.S. authorities decided to press criminal charges," said Assistant
Attorney General Lanny Breuer at a press conference to announce the
settlement, "HSBC would almost certainly have lost its banking license in the
U.S., the future of the institution would have been under threat and the
entire banking system would have been destabilized."

Why governments can not confiscate or nationalise HSBC and continue legal
operations?

~~~
anigbrowl
That sort of thing leads to investor panics and possibly social instability.
Go to the Wall Street Journal website and read the comments on any political
story. there's a large number of people who are convinced that Obama is a
full-blown Communist and just waiting for his chance to go down the same path
as Mao Tse Tung, Fidel Castro, Hugo Chavez etc.

That's why it's safer o work through legislative means. People have wildly
distorted ideas about the executive branch.

EDIT: see, for example, one of the sibling comments here.

------
olefoo
The regulatory capture of pretty much every national government by the global
financial superorganism[1] is an existential threat to humanity in ways that
we are barely equipped to comprehend.

Some of the more pure examples of this evil ( from the human standpoint ) are
what happens in Amazons warehouse facilities [2]. But the more mundane
examples show up with your monthly bills.

It seems not long from now that corporations wanting to redevelop a desirable
plot of land will be able to buy a permit to exterminate the humans living on
it. And while today that notion sounds faintly ridiculous, it's not unheard
of; we are all american indians now.

1\.
[http://www.kk.org/thetechnium/archives/2008/10/evidence_of_a...](http://www.kk.org/thetechnium/archives/2008/10/evidence_of_a_g.php)

2\. <http://j.mp/XgOnkf>

------
guard-of-terra
There is a simple solution: don't punish the bank, punish individual bankers.

Don't revoke license, so the world does not collapse, instead make decision
makers lose sleep.

~~~
wpietri
That's simple-sounding, but I don't think it's simple.

Large organizations like banks are fantastic for obscuring responsibility. The
CEOs say, "I didn't know." The line workers say, "I was just following
orders."

Everybody in between keeps things hazy because it's useful to their careers.
When things go badly, they need to be able to claim it wasn't their fault.
When things go well, they try to claim credit.

The net result is nobody gets punished when there is crime on a massive scale.

I think the only viable option is to punish the company. I think it would also
be fair to change the law such that CEOs are treated as negligent if they let
internal controls get to the point where criminal things are happening without
an obvious, chargeable conspiracy by a group of workers. But good luck getting
our bought-and-paid-for congressmen to approve something like that.

~~~
guard-of-terra
CEO is totally responsible for the big picture.

Should be personally liable for large-scale crimes.

------
msandford
It's pretty disgusting that we're throwing principles away for the sake of
expediency. How long before there are no principles left? What does that kind
of country look like?

Personally I'd like to see a country where the rule of law is still respected.
Forget expediency. I'll take some pain every once in a while to avoid this
kind of outrage.

~~~
Evbn
Do we have fewer principles now than in the past?

~~~
harryh
Of course we do! The past was a perfect glorios place! Men were big strong men
who supported a family all on their own. Women were perfect housewives that
raised 2 beautiful children. Everyone had a big house a nice green lawn and 2
of those oversized 50s cars. It's been downhill ever since!

~~~
msandford
Well, uh, the country was founded on the principle that a government should be
accountable to the people. A lot of men died toward that end. So I'd say that
yes, at some point, we did have principles. And it was in the past, oddly
enough.

~~~
harryh
Which dying men are we talking about? The ones that owned slaves or just the
ones that made sure the black guys could only leave through the door to the
alley?

Look, I'm not saying that there's not a lock of fucked up in the world. There
surely is, and some of the bank stuff is probably a part of it. But if you
step back a bit and consider the big picture things really do appear to be
moving in the right direction overall.

~~~
msandford
I would disagree with the idea that things are moving in the right direction
overall, but I get that you think so. I don't even think you're totally wrong
or crazy, I just disagree.

Agreed slavery was non-ideal but there were a lot of white guys that died
during the Revolutionary war.

~~~
harryh
Look at some of the big picture statistics for worldwide poverty, health,
lifespans, violence, freedom, corruption, etc. Nearly all of them are moving
in a positive direction, in some cases dramatically so.

To me the only really worrying long term trend is environmental impact. We
might be consuming our planets resources at an unsustainable rate.

~~~
genwin
_Might_ be? How much more evidence would be needed? The planet can probably
sustain less than a billion people long term at a first-world standard of
living.

~~~
harryh
'eh, maybe. Though who knows what future technologies will bring? Maybe in a
100 years will have a 20 billion people but most of them will be uploaded to
the singularity. Maybe nuclear & solar will save us all. Maybe we learn to
mitigate the effects of global warming by some sort of large scale teraforming
projects.

Predictions are hard, especially about the future.

There's a big part of me that thinks that the "we're all doomed because of how
we're ruining the environment" comes from the same place as "Americans used to
have principles, but now we're just a bunch of self centered assholes" which
comes from the same place as
[http://en.wikipedia.org/wiki/Tree_of_the_knowledge_of_good_a...](http://en.wikipedia.org/wiki/Tree_of_the_knowledge_of_good_and_evil).

Everyone has their own way of thinking that things used to be perfect but then
we turned to sinners and fucked it all up.

------
don_draper
I'm amazed at all the attacks on Matt Taibbi and Elizabeth Warren in this
thread. They are standing up for what they believe is right in their own
unique way. They have worked hard to get to where they are. Give them some
respect.

------
nonamegiven
At this point I have to believe that a Justice Department that will push a guy
to suicide for taking files is plainly in partnership with corrupt banks. The
Justice Department is merely the legal firm for the banks.

------
tsotha
I'm amazed Taibbi could write an entire article on this subject and not
mention Jon Corzine.

Oh wait. No I'm not.

------
bsims
Apologies for linking outside this thread, but some of the audience asked me
to write this. Hope it is helpful.

<http://news.ycombinator.com/item?id=5236372>

------
patrick_curl
I've started a WhiteHouse.gov petition - Send the Execs to Jail, but Keep the
bank running by hiring replacements. Show that people who do this are held
accountable, even if the business is too big to fail. <http://wh.gov/dtmj>

~~~
smsm42
Excellent idea - have government-selected people with no experience with the
company run the company, with a promise that if anything happens in the huge
company they are managing, they go to jail. Oh yes, and to make things easier
send all the people who know what happens in the company to jail so they
aren't accessible and have zero motivation to help. Now you only have to
properly cap the pay for new management - to ensure you pay them less than a
comparable job elsewhere - and you have a winning recipe. I can't imagine how
this could go wrong.

