$60 trillion shakedown?

Yes, $60 trillion, not billion.

You may have read that HSBC bank is paying the Justice Department almost $2 billion to settle a “deferred prosecution” for drug money laundering, and processing illicit financial transactions from countries like North Korea and Iran. In other words, they got caught with their corporate fingers in the cash register. So what’s their punishment? Nothing, chump change. Wachovia/Wells Fargo did this a few years ago and got away with it. This time it is HSBC. Who’s next?

Although you may think that $2 billion is a shockingly high number, I cannot find the answer to two questions.

One, how much money did they make? It’s reported that they processed over $60 trillion of transactions! Sixty trillion dollars! That’s about four times our national debt.

If they made $5 billion (chump change on $60 trillion,) then a ~$2 billion dollar fine is a minor cost of doing business, and was a good deal for HSBC. I suspect that bank fees from laundering money are very high so $5 billion is a low number.  In any instance, I don’t think that anyone in upper management was fired and they won’t be indicted, so they are still making lots of money. It’s the stockholders who are paying the fine, and not bank management.

Two, if you or I were caught laundering drug money, we’d be spending a long time in prison. When HSBC does it, no one goes to prison. This is another case of the “too big to fail” syndrome. If HSBC was ruined for being involved in processing $60 trillion (bottom of NY Times article) of illicit transactions, (that management didn’t know anything about it, of course) it would cost jobs. They threaten, our government caves.

A few years ago, Wachovia got caught doing something similar. Perhaps this post should have been titled – How to launder drug money, make a fortune and get away with it? The short answer – become a bank

If you read The Guardian newspaper article you’ll see how Wachovia, later bought by Wells Fargo laundered a third of a trillion dollars ($378.4 billion) for the Latin American cartels and only paid a small fine of $160 million compared to their probable cut.

If a fine of less than 1% of their likely profits and no jail time for anyone is not good business, what is? 1% is an accounting error. If Wachovia only made 5% on $378.4 billion of laundered drug money they netted $18.92 billion. $160 million is pocket change for them.

Being too big to fail doesn’t only affect banks involved in the real estate markets, they are too big to fail, period. If they did, they’d take our government down with them. As such, they do what they want.  And as I wrote, if you’re small you get sentenced, if you’re very big you get rewarded.

I am not a fan of the banks. They got this country into a financial mess when they loaned mortgage money to people who they knew couldn’t make their house payments, irrespective of house values.

They sold some of these bad loans to Fannie Mae and Freddie Mac among others, taking down the value of the entire property market. That hurt our global economy, and you.

Banks also makes it easy to borrow money, but very difficult to pay it back without owing a variety of substantial fees. They work very hard to hold us upside-down to shake every penny they can from our pockets. They are now working hard to get us into our next crisis, the soon-to-be trillion dollar student loan fiasco. And yes, they launder money and ask for bailouts. What’s not to like about the banks?

If I’m elected next election cycle, I’ll work to get on the House Committee on Financial Services. The banks won’t be very happy afterwards.

Shakedown? You decide.