Justice Dept.: TBTF banks now 'Too Big To Jail'

This is an outrage. The Too Big To Fail banks are now also the Too Big To Jail banks, and that's the official word from America's top prosecutor, Attorney General Eric Holder:

"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. I think that is a function of the fact that some of these institutions have become too large."

As Borsage notes, Attorney General Holder's statement renders bank supervision and regulation meaningless:

Holder's outrageous admission means that bankers operate -- and know they operate -- above the law. That renders all the argument about regulations and legal limits laughable. Bankers spend tens of millions lobbying to weaken regulations and starve regulators of authority and resources. But when the action gets hot, the bubble starts to inflate, the music keeps playing, they can trample the laws, mislead the regulators and defraud their customers, swathed in the confidence that the laws will not apply to them.

Meanwhile, Sen. Elizabeth Warren, creator of the Consumer Financial Protection Bureau, noted the hypocrisy of Too Big To Jail:

"If you're caught with an ounce of cocaine, the chances are good you're gonna go to jail. If it happens repeatedly, you may go to jail for the rest of your life. But evidently if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your bed at night -- every single individual associated with this. And I think that's fundamentally wrong."

It's Official: Too Big to Fail Banks Are Too Big to Jail

By Robert L. Borosage

March 7, 2013 | Huffington Post

URL: http://huff.to/13Hlg0I

Taibbi: U.S. Gov't. let banksters get away with murder

Here's how Matt Taibbi sums up what British bank HSBC did:

For at least half a decade, the storied British colonial banking power helped to wash hundreds of millions of dollars for drug mobs, including Mexico's Sinaloa drug cartel, suspected in tens of thousands of murders just in the past 10 years – people so totally evil, jokes former New York Attorney General Eliot Spitzer, that "they make the guys on Wall Street look good." The bank also moved money for organizations linked to Al Qaeda and Hezbollah, and for Russian gangsters; helped countries like Iran, the Sudan and North Korea evade sanctions; and, in between helping murderers and terrorists and rogue states, aided countless common tax cheats in hiding their cash.

"They violated every goddamn law in the book," says Jack Blum, an attorney and former Senate investigator who headed a major bribery investigation against Lockheed in the 1970s that led to the passage of the Foreign Corrupt Practices Act. "They took every imaginable form of illegal and illicit business."

But here's why the U.S Government didn't prosecute HSBC in its own words:

"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."

Again, about a week later, the U.S. Justice Department gave a pass to UBS, which helped to illegally fix the LIBOR rate:

But the Justice Department wasn't finished handing out Christmas goodies. A little over a week later, Breuer was back in front of the press, giving a cushy deal to another huge international firm, the Swiss bank UBS, which had just admitted to a key role in perhaps the biggest antitrust/price-fixing case in history, the so-called LIBOR scandal, a massive interest-rate­rigging conspiracy involving hundreds of trillions ("trillions," with a "t") of dollars in financial products. While two minor players did face charges, Breuer and the Justice Department worried aloud about global stability as they explained why no criminal charges were being filed against the parent company.

"Our goal here," Breuer said, "is not to destroy a major financial institution."

HSBC was given warning after warning. An HSBC employee charged with detecting money-laundering blew the whistle to the FBI. Nothing. This gives the lie, once again, that businesses can be left to regulate themselves. 

And, not to sound like a blood-and-guts conservative, but, without the death penalty (prosecutions, jail time) there is no deterrent. We now have, according to our own government, "an unarrestable class" of banksters who are too socially and economically important to prosecute. To which I say: destroy away!  Off with their heads!  After all, isn't "creative destruction" what free enterprise is all about?  

Gangster Bankers: Too Big to Jail

How HSBC hooked up with drug traffickers and terrorists. And got away with it

By Matt Taibbi

February 14, 2013 | Rolling Stone

URL: http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214#ixzz2L6TJerww

Bill Black: Loan fraud caused the Great Recession

Sorry, I hate to be that guy who keeps bringing up stuff that happened, like, six years ago, but getting the history right on the financial crisis that caused the Great Recession matters, 'cos this is gonna happen again.

I'm just going to quote two-fisted regulator Bill Black verbatim, because there is only so much condensing I can do:

The ultra brief version is (1) by 2006 roughly 40 percent of total mortgage loans originated were "liar's loans," (fyi, roughly half of all loans called "subprime" were also liar's loans -- the categories are not mutually exclusive, (2) the incidence of fraud among liar's loans is 90 percent, (3) an honest real estate lender would not make pervasively fraudulent loans because doing so would inevitably cause the firm to fail (absent a bailout), (4) liar's loans, however, are optimal "ammunition" for "accounting control fraud", (5) investigations (and logic) have confirmed that it was overwhelmingly lenders and their agents who put the lies in liar's loans, (6) no lender was ever required or encouraged by the government to make or purchase liar's loans -- the opposite was true, the government discouraged such loans and industry documents confirm this fact, (7) liar's loans make an excellent "natural experiment" because even Fannie and Freddie were not encouraged to make these loans -- because they did not aid them in meeting the "affordable housing goals", (8) Fannie and Freddie, eventually, purchased enormous amounts of liar's loans for the same reason that the investment banks (not subject to the CRA or any affordable housing goals did) they created massive (albeit fictional) short-term accounting income, which flowed through to the bonuses of many Fannie and Freddie executives. Let me put these data in another format -- by 2006, lenders were making over two million fraudulent liar's loans annually. Fraudulent liar's loans grew massively because lenders (and purchasers) created perverse incentives to make and purchase massive amounts of these fraudulent loans.

This level of fraud is massively greater than during the S&L debacle, where accounting control fraud never became a dominant national lending strategy. Liar's loans grew so rapidly, and became such a large share of the market that they constituted the loans "on the margin" that hyper-inflated the financial bubble, which drove the Great Recession.

A liar's loan, by the way, is a low-documentation or no-documentation home mortgage loan. This is not the same as a subprime loan, where the lender (usually a bank) knows the borrower has bad credit, sketchy employment history, etc., and therefore gives the borrower a higher rate of interest to compensate the lender for taking such a risk.  

So, the whole line that "lenders were greedy" during the housing bubble is only half true. Mobsters and bank robbers are also greedy, you could say. I'm greedy. You're greedy. Children are greedy with cookies and crayons. The difference is that robbers and banksters are also criminals. Financial fraud and lending fraud are crimes.

Besides the media and of course Wall Street actively covering up this fraud, Dubya and especially Obama deserve the most blame and contempt for referring zero fraud cases to the Justice Department for criminal prosecution. Sums up Black:

One of our mantras in white-collar criminology is: "if you don't look, you won't find." The Frontline documentary begins the process of explaining what those of us who are aware of what a real investigation is and what it requires have been saying for years -- neither the Bush nor the Obama administration has been willing to conduct a real investigation of the elite banksters whose frauds made them wealthy and drove the financial crisis and the Great Recession. This is one of the hallmarks of crony capitalism. It cripples our economy, our democracy, and our integrity.

[...] Any bank that is too big to fail and to prosecute is a clear and present danger that should be promptly shrunk to the point that it can no longer hold the global economy hostage in order to extort immunity from the criminal laws for the controlling officers who became wealthy by being what Akerlof and Romer aptly described as "looters."

The OCC's Tragic Response to the Frontline Expose: The Untouchables 

By William K. Black

January 26, 2013 | Huffington Post

URL: http://www.huffingtonpost.com/william-k-black/frontline-banking-crisis_b_2557146.html

Basel III: TBTF banks drag us back to the brink

(HT: Vern).  I don't pretend to get this 100%. But here's the upshot: the evil TBTF banks have successfully lobbied for lower liquidity (i.e. cash) requirements from the international "Basel III" Committee on Banking Supervision. Specifically, the banksters have been fighting to include riskier (read: shittier) securities in the numerator of the so-called Liquidity Coverage Ratio that banking regulators use to assess the riskiness of a bank.

Why is liquidity important, and why are the mega-banks lobbying to lower the liquidity requirements? Because the 2007-08 financial crisis started with the collapse of AIG, which in turn caused a run on banks when they couldn't honor their deposits and pay their creditors (because AIG was supposed to "insure" the banks' riskier investments that were a toxic house of cards). In other words, everybody everywhere had a shortage of cash simultaneously, leading us to near-collapse of the global financial system... until the U.S. Treasury, Federal Reserve and other central banks stepped in with huge amounts of free cash for the banks, which continues to this day.

So... now older and wiser, our banking regulators were supposed to pass Basel III reforms to prevent this from happening again... but the banksters and their lobbyists are patient and persistent, and have continued pushing to restore risk, since the only way they can make huge profits for themselves at our expense is through huge amounts of leverage (i.e. using borrowed money to buy assets and securities).  

I know it's tempting to let your eyes glaze over and ignore this stuff, or just buy into the myth that "irresponsible borrowers" and the FMs caused the Great Recession, but you really need to pay attention and tell your Congressmen that you care about banking supervision.  The mere fact that they (the banksters) care about this and spend $ billions to prove it, while you and I are silent, puts them at a huge advantage. 

You Call That Liquid? New Basel III Liquidity Rules Ineffectual

By Mayra Rodriguez Valladares

January 7, 2013 | American Banker

URL: http://www.americanbanker.com/bankthink/you-call-that-liquid-new-basel-iii-liquidity-rules-ineffectual-1055635-1.html

Obama Admin. confirms that banksters are above the law

The banksters run the world. Even when they break the law, their TBTF banks are too "systemically important" to the financial system to prosecute them, even if it's for something as blatant as laundering drug money:

Nor have any individuals been charged at the five other big European banks that have also managed to dodge formal money-laundering charges in recent years, including British bank Standard Chartered, which entered its own deferred prosecution agreement on Monday. Apparently, all of this constant money laundering was done by robots.

"The message this is sending is if you want to engage in money laundering, make sure you're doing it within the context of your employment at a bank," [Notre Dame law professor Jimmy] Gurulé said in a phone interview. "And don't go small. Do it on a very large scale, and you won't get prosecuted."

By contrast, in 2010, the U.S. Congress took it upon itself to impose a mandatory sentence of 5 years in prison for possessing 28 grams of crack cocaine (that's down from 5 years for 5 grams in the 1980s).  So why isn't laundering billions of dollars of drug money or Iranian embargo money worth a mandatory sentence in prison?  Maybe I sound like an angry black man, but when you make these simple comparisons then you see who writes the laws, and for whom. The game is fixed.

UPDATE (12.14.2012): My man Matt Taibbi also made the obvious banksters-drug users comparison on prosecutions and mandatory sentencing on his Rolling Stone blog a day after I did.

Obama Administration Essentially Admits That Some Banks Are Too Big To Jail, Which Is Troubling

By Mark Gongloff

December 11, 2012

URL: http://huff.to/YXKOpr

Ames: Did banksters murder key whistleblower?

This "suicide" of a whistleblower on the day she was supposed to show up in court doesn't just smell fishy, it smells like a dried-out sea of dead fish.

Exclusive: Tracy Lawrence and the Foreclosure Suicide that America Ignored

By Mark Ames

August 20, 2012 | The Daily Banter

URL:  http://thedailybanter.com/2012/08/exclusive-tracy-lawrence-and-the-foreclosure-suicide-that-america-ignored/

We're so screwed

When our regulators and politicians believe that revealing banksters' crimes is more "dangerous" and "destabilizing" than the crimes themselves, then you know we're totally screwed.

Below the Fold: Rumor Has It We're Screwed

By Richard Zombeck

July 26, 2012 | Huffington Post

URL: http://huff.to/OM6RnC