9 ms·

Bankers now Too Big to Jail

244 points by jmah 14y ago

callmevlad 14y ago
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-Warren-to-bank-regulators-When-was-the-last-time-you-brought-Wall-Street-banks-to-trial http://www.dailykos.com/story/2013/02/15/1187417/-Elizabeth-...
- peterjmag 14y ago
  Can anyone here answer Warren's question, even if the regulators couldn't? I'd be interested to learn about any court trials prosecuting larger banks (that is, if any exist), but it's proving difficult to Google.
  - kami8845 14y ago
    The fact that the people in that room couldn't (who certainly know of any single time a wall street bank has gone to trial in the past years) and that Warren is so sure of her position is enough evidence for me personally
- hugi 14y ago
  Wow.
- meomix 14y ago
  It's really a shame more senators can't be as tenacious as Ms Warren. What is the cause of this? Is it because so many are 'bought off?'
  - pyre 14y ago
    Not necessarily 'bought off' as in handing over cash for favor, but a lot of politicians are already part of 'the machine' and profit handsomely from it, so their personal goals line up.
    - chetanahuja 14y ago
      And that's the reason term limits are needed for each and every political office. Of course nothing on the order of a constitutional amendment is even remotely possible in the current US political system (that's likely to persist for a long long time to come).
      - eropple 14y ago
        I don't think term limits fix what you're asserting. If anything, they just codify when people get out of office and go into particularly posh jobs with the people who were lobbying them.
      - hackinthebochs 14y ago
        Term limits are not the solution! In fact it will just exacerbate the problem. If Congress ends up as perpetual freshmen, who do you think will end up with an even higher proportion of power in Washington? The lobbyists and the staffers. These people have the insider knowledge, the connections, and the influence and they will be able to steamroll over an endless parade of newbie lawmakers. As someone said higher up, the reason nothing is ever done is because the congressmen's incentives align with the banks and the power brokers. The only solution is to ensure that those with voting power in Washington have incentives that are the opposite of the banks. Term limits do not do this. Possible solutions: Pay Congress and important oversight positions a salary proportional to their importance--somewhere in the multiple millions per year. Make lobbying any government official illegal (anything beyond writing a letter to your Congressmen). A lifetime ban from working for any company that is affected by decisions made while in office. 100% publicly financed campaigns.
  - fnordfnordfnord 14y ago
    Bought off, some maybe, for those that won't be bought, they'll either play along, or face fierce opposition within their own party, lose financial support and hence, have a slim chance to be reelected. Consider some of the things Ted Kaufman said in the recent PBS special about this exact issue. http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/untouchables/ted-kaufman-wall-street-prosecutions-never-made-a-priority/ http://www.pbs.org/wgbh/pages/frontline/business-economy-fin...
  - rayiner 14y ago
    People on HN have a warped view of how leverage works in American politics. The prevailing meme of congresspeople who are bought off has a lot of appeal, but its far from the facts. My wife was a lobbyist so I have a bit of insight into the situation. Fact is, the usual suspects don't need to bribe congressmen. Who needs bribes when you have beliefs? You just need something like the heritage foundation or AEI to say that suing banks or regulating them will cost jobs and boom: you can count on tons of votes from people whose ideological interests are aligned with those of the banks. Corruption in the US looks different than in say China. Its puritan corruption. Convincing true believers that what's good for big corporations is good for everyone and for the all important jobs. Everything starts from there.
- tptacek 14y ago
  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 14y ago
    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 14y ago
      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 14y ago
        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 14y ago
        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.
clicks 14y ago
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 14y ago
  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 14y ago
    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 14y ago
      > 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.
anonymfus 14y ago
>"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?
- dabeeeenster 14y ago
  Because money is power
- anigbrowl 14y ago
  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.
- monochromatic 14y ago
  Mr. Obama, I had no idea you were a HNer!
- Evbn 14y ago
  Or throw some managers in jail and let the business keep operating.
- notahacker 14y ago
  It's a huge, largely foreign-owned and run multinational company that looks after billions of dollars of largely innocent people's financial assets. I think it's fair to say the US government attempting to seize control of a large part of the operation might have a few negative side effects. The US has imposed trade sanctions and even been implicated in coups against foreign regimes responsible for relatively minor nationalizations.
cperciva 14y ago
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 14y ago
  But doing things like purposely obfuscating money flowing between the US and Iran as a middle man to get around sanctions?
  - jacquesm 14y ago
    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 14y ago
      | 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.
mcphilip 14y ago
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 14y ago
  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 14y ago
    Libor TLDR: "Fraud."
    - mtgx 14y ago
      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 14y ago
        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.
  - FireBeyond 14y ago
    Not "changed how they came up with the number". What you actually mean is "knowingly supplied false numbers" - note that the numbers were the offer rates, and instead, these banks would give numbers that were preferential to their positions, not an accurate reflection.
guard-of-terra 14y ago
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.
- conroe64 14y ago
  If you are a decision maker, though, that decision can come back and bite you in the ass.
  - mtgx 14y ago
    I think that's the point. They should fear that when making decisions.
- wpietri 14y ago
  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 14y ago
    CEO is totally responsible for the big picture. Should be personally liable for large-scale crimes.
msandford 14y ago
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 14y ago
  Do we have fewer principles now than in the past?
  - harryh 14y ago
    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 14y ago
      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 14y ago
        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 14y ago
saosebastiao 14y ago
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 14y ago
  Raise your hand if you guessed that it was Taibbi before clicking the link.
  - harryh 14y ago
    raises hand
  - fnordfnordfnord 14y ago
    Guessed? I knew.
- Amadou 14y ago
  I think it is the opposite, he makes journalism look like smears. I pretty much agree with him 100% on the issues but 0% on the presentation -- I can't stand to read his articles because they drip with vitriol. Over the years I've grown used to seeing that style associated with attempts to deliberately misinform and pander to the worst elements of the population's character. So when I see him do it, it compels me to distrust his reporting.
- AlexDanger 14y ago
  I'm not familiar with Taibbi's work but what exactly is wrong with this article? His facts are easily verifiable. Sure its polemical but that doesnt exclude it from being journalism. Indeed it seems he's had some commendations for his financial writing regarding the crap we've seen from banks in the last few years: http://en.wikipedia.org/wiki/Matt_Taibbi#Financial_journalism http://en.wikipedia.org/wiki/Matt_Taibbi#Financial_journalis... Is there evidence he's been loose with facts in the past or do you take issue with his writing style?
  - 14y ago
olefoo 14y ago
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_g.php http://www.kk.org/thetechnium/archives/2008/10/evidence_of_a... 2. http://j.mp/XgOnkf http://j.mp/XgOnkf
ohazi 14y ago
> "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 14y ago
  > Corporations don't commit crimes, people d but but corporations are people ?!? they said
bsims 14y ago
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 14y ago
  Please write a blog post on this!
  - bsims 14y ago
    Will do. Mind being a second set of eyes on it?
    - dbcooper 14y ago
      No problem.
    - jjsz 14y ago
      May the audience get the link of where you're going to post it? Thanks.
    - hncommenter13 14y ago
      If you're looking for a 3rd pair of eyes, happy to help. Ex-VC, CFA/MBA, have spent some time investigating stock frauds as well (but not quite to your level!).
InclinedPlane 14y ago
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.
nonamegiven 14y ago
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.
JumpCrisscross 14y ago
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 14y ago
  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 14y ago
    I've found that opinions that run contrary to the group leanings often do well on HN. Its still a pretty intellectually curious place.
- lawrence 14y ago
  It didn't make me laugh.
- znowi 14y ago
  Being a trader yourself, your sentiment is well seen and understood. I see how Taibbi's style can be of annoyance to you, but I think you're largely nitpicking. The essence of it stays valid and I yet to see an important executive going to jail, either in relation to 2008 or Libor.
patrick_curl 14y ago
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 http://wh.gov/dtmj
- smsm42 14y ago
  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.
tsotha 14y ago
I'm amazed Taibbi could write an entire article on this subject and not mention Jon Corzine. Oh wait. No I'm not.
don_draper 14y ago
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.
bsims 14y ago
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 http://news.ycombinator.com/item?id=5236372

244 points by jmah 14y ago

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

peterjmag 14y ago
Can anyone here answer Warren's question, even if the regulators couldn't? I'd be interested to learn about any court trials prosecuting larger banks (that is, if any exist), but it's proving difficult to Google.
- kami8845 14y ago
  The fact that the people in that room couldn't (who certainly know of any single time a wall street bank has gone to trial in the past years) and that Warren is so sure of her position is enough evidence for me personally
hugi 14y ago
Wow.
meomix 14y ago
It's really a shame more senators can't be as tenacious as Ms Warren. What is the cause of this? Is it because so many are 'bought off?'
- pyre 14y ago
  Not necessarily 'bought off' as in handing over cash for favor, but a lot of politicians are already part of 'the machine' and profit handsomely from it, so their personal goals line up.
  - chetanahuja 14y ago
    And that's the reason term limits are needed for each and every political office. Of course nothing on the order of a constitutional amendment is even remotely possible in the current US political system (that's likely to persist for a long long time to come).
    - eropple 14y ago
      I don't think term limits fix what you're asserting. If anything, they just codify when people get out of office and go into particularly posh jobs with the people who were lobbying them.
    - hackinthebochs 14y ago
      Term limits are not the solution! In fact it will just exacerbate the problem. If Congress ends up as perpetual freshmen, who do you think will end up with an even higher proportion of power in Washington? The lobbyists and the staffers. These people have the insider knowledge, the connections, and the influence and they will be able to steamroll over an endless parade of newbie lawmakers. As someone said higher up, the reason nothing is ever done is because the congressmen's incentives align with the banks and the power brokers. The only solution is to ensure that those with voting power in Washington have incentives that are the opposite of the banks. Term limits do not do this. Possible solutions: Pay Congress and important oversight positions a salary proportional to their importance--somewhere in the multiple millions per year. Make lobbying any government official illegal (anything beyond writing a letter to your Congressmen). A lifetime ban from working for any company that is affected by decisions made while in office. 100% publicly financed campaigns.
- fnordfnordfnord 14y ago
  Bought off, some maybe, for those that won't be bought, they'll either play along, or face fierce opposition within their own party, lose financial support and hence, have a slim chance to be reelected. Consider some of the things Ted Kaufman said in the recent PBS special about this exact issue. http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/untouchables/ted-kaufman-wall-street-prosecutions-never-made-a-priority/ http://www.pbs.org/wgbh/pages/frontline/business-economy-fin...
- rayiner 14y ago
  People on HN have a warped view of how leverage works in American politics. The prevailing meme of congresspeople who are bought off has a lot of appeal, but its far from the facts. My wife was a lobbyist so I have a bit of insight into the situation. Fact is, the usual suspects don't need to bribe congressmen. Who needs bribes when you have beliefs? You just need something like the heritage foundation or AEI to say that suing banks or regulating them will cost jobs and boom: you can count on tons of votes from people whose ideological interests are aligned with those of the banks. Corruption in the US looks different than in say China. Its puritan corruption. Convincing true believers that what's good for big corporations is good for everyone and for the all important jobs. Everything starts from there.
tptacek 14y ago
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 14y ago
  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 14y ago
    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 14y ago
      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 14y ago
        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.

clicks 14y ago

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 14y ago
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 14y ago
  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 14y ago
    > 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.

anonymfus 14y ago

dabeeeenster 14y ago
Because money is power
anigbrowl 14y ago
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.
monochromatic 14y ago
Mr. Obama, I had no idea you were a HNer!
Evbn 14y ago
Or throw some managers in jail and let the business keep operating.
notahacker 14y ago
It's a huge, largely foreign-owned and run multinational company that looks after billions of dollars of largely innocent people's financial assets. I think it's fair to say the US government attempting to seize control of a large part of the operation might have a few negative side effects. The US has imposed trade sanctions and even been implicated in coups against foreign regimes responsible for relatively minor nationalizations.

cperciva 14y ago

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 14y ago
But doing things like purposely obfuscating money flowing between the US and Iran as a middle man to get around sanctions?
- jacquesm 14y ago
  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 14y ago
    | 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.

mcphilip 14y ago

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 14y ago
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 14y ago
  Libor TLDR: "Fraud."
  - mtgx 14y ago
    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 14y ago
      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.
- FireBeyond 14y ago
  Not "changed how they came up with the number". What you actually mean is "knowingly supplied false numbers" - note that the numbers were the offer rates, and instead, these banks would give numbers that were preferential to their positions, not an accurate reflection.

guard-of-terra 14y ago

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.

conroe64 14y ago
If you are a decision maker, though, that decision can come back and bite you in the ass.
- mtgx 14y ago
  I think that's the point. They should fear that when making decisions.
wpietri 14y ago
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 14y ago
  CEO is totally responsible for the big picture. Should be personally liable for large-scale crimes.

msandford 14y ago

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 14y ago
Do we have fewer principles now than in the past?
- harryh 14y ago
  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 14y ago
    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 14y ago
      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 14y ago

saosebastiao 14y ago

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 14y ago
Raise your hand if you guessed that it was Taibbi before clicking the link.
- harryh 14y ago
  raises hand
- fnordfnordfnord 14y ago
  Guessed? I knew.
Amadou 14y ago
I think it is the opposite, he makes journalism look like smears. I pretty much agree with him 100% on the issues but 0% on the presentation -- I can't stand to read his articles because they drip with vitriol. Over the years I've grown used to seeing that style associated with attempts to deliberately misinform and pander to the worst elements of the population's character. So when I see him do it, it compels me to distrust his reporting.
AlexDanger 14y ago
I'm not familiar with Taibbi's work but what exactly is wrong with this article? His facts are easily verifiable. Sure its polemical but that doesnt exclude it from being journalism. Indeed it seems he's had some commendations for his financial writing regarding the crap we've seen from banks in the last few years: http://en.wikipedia.org/wiki/Matt_Taibbi#Financial_journalism http://en.wikipedia.org/wiki/Matt_Taibbi#Financial_journalis... Is there evidence he's been loose with facts in the past or do you take issue with his writing style?
- 14y ago

olefoo 14y ago

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_g.php http://www.kk.org/thetechnium/archives/2008/10/evidence_of_a... 2. http://j.mp/XgOnkf http://j.mp/XgOnkf

ohazi 14y ago

> "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 14y ago
> Corporations don't commit crimes, people d but but corporations are people ?!? they said

bsims 14y ago

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 14y ago
Please write a blog post on this!
- bsims 14y ago
  Will do. Mind being a second set of eyes on it?
  - dbcooper 14y ago
    No problem.
  - jjsz 14y ago
    May the audience get the link of where you're going to post it? Thanks.
  - hncommenter13 14y ago
    If you're looking for a 3rd pair of eyes, happy to help. Ex-VC, CFA/MBA, have spent some time investigating stock frauds as well (but not quite to your level!).

InclinedPlane 14y ago

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.

nonamegiven 14y ago

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.

JumpCrisscross 14y ago

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 14y ago
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 14y ago
  I've found that opinions that run contrary to the group leanings often do well on HN. Its still a pretty intellectually curious place.
lawrence 14y ago
It didn't make me laugh.
znowi 14y ago
Being a trader yourself, your sentiment is well seen and understood. I see how Taibbi's style can be of annoyance to you, but I think you're largely nitpicking. The essence of it stays valid and I yet to see an important executive going to jail, either in relation to 2008 or Libor.

patrick_curl 14y ago

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 http://wh.gov/dtmj

smsm42 14y ago
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.

tsotha 14y ago

I'm amazed Taibbi could write an entire article on this subject and not mention Jon Corzine. Oh wait. No I'm not.

don_draper 14y ago

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.

bsims 14y ago

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