By Matt Stoller, a fellow at the Roosevelt Institute. You can follow him at http://www.twitter.com/matthewstoller
This is a straight up admission.
State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.
Instead, HSBC announced on Tuesday that it had agreed to a record $1.92 billion settlement with authorities. The bank, which is based in Britain, faces accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money illegally through its American subsidiaries.
In 2009, it really wasn’t possible to indict one of the largest financial institutions for fraud because it really would bring down the entire financial system. And that’s a problem that the Department of Justice can’t solve; that’s a problem the Financial Stability Oversight Council and the Treasury Department and the regulators have to solve first.
And that’s underlying all of this. Now the SEC is in a different place, because an SEC case is not going to bring down an institution the way a criminal indictment would. It’s a different set of standards.
Policymakers decided that was not a viable option in 2008 and invested huge amounts of treasure and energy to keep them alive. So I think it’s an honest acknowledgment of what’s very, very broken with our financial system and continues to be broken with our financial system.