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Treasury and Fed Officials Prevaricate Before Elizabeth Warren About Whether They Will Ever Get Tough With Banks

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It’s a good thing Elizabeth Warren seems to regard contending with uncooperative, evasive and obviously misleading witnesses as a form of sport. I’d want to punch them.

Today Warren continued the line of questioning that she started in her first Senate Banking Committee hearing: what is it going to take to get someone in authority to come down hard on banks and bank executives? Given the time limits imposed on each Senator, she is forced to focus on relatively simple questions that will expose how regulators are craven and/or captured. This time, the point of departure was the settlement for HSBC’s money laundering, which was widely decried as inadequate.

As much as Warren came off well today, if you knew the history on this beat, the responses by the Treasury and Fed officials were dishonest and infuriating.

There is a big dead body in the room, namely, Standard Chartered’s settlement last year over Iran-related money laundering lasting over a decade. Warren keeps asking the officials what level of money laundering-related abuses would it take to get them to pull the license of a bank, or even hold hearings on revoking their license. We’ll discuss shortly how that issue was addressed. But the bottom line is the Treasury and Fed representatives made clear that this was something they would not entertain, and the Fed was remarkably direct in taking that position.

Last year, Standard Chartered was negotiating a settlement of money laundering charges. The New York state banking regulator, Benjamin Lawsky was initially working with Federal banking regulators, under the lead of the Treasury, since this was an OFAC (U.S. Office of Foreign Assets Control) matter. Lawsky thought there was more to this than the national regulators did. He asked the point person at the Fed whether he could take this further. The Fed official, apparently assuming a newbie state regulator wouldn’t do all that much, gave his assent.

Bad assumption. Lawsky did precisely the sort of thing Warren asked about: he ordered the bank appear at a hearing to explain why he should not revoke its New York banking license. And the order itself provided riveting detail about how the bank had persistently defied previous regulatory orders to stop its money laundering with Iran and other verboten nations. It even ignored the advice of outside counsel.

Lawsky’s action produced a vitriolic response not only from Standard Chartered but from the Federal regulators, who started a full bore press campaign against Lawsky. But the only audience that mattered to Lawsky was Governor Cuomo and the New York press, particularly in Albany, and both were on his side.

Lawsky had all the leverage he needed. Standard Chartered conducted its US banking operations through a New York branch. Loss of the license for that branch would end its access to dollar clearing services. That would cripple the bank; indeed, it would be hard to see how Standard Chartered could do an orderly wind-down of that operation. We predicted, correctly, that the hearing would not take place; Standard Chartered absolutely did not want that to happen since a hearing would mean the settlement negotiations had broken down.

The bank admitted to $250 billion of impermissible conduct, more than four orders of magnitude above the $14 million it had previously insisted was all it had done wrong, and agreed to pay $340 million in fines. The Feds, apparently unwilling to reopen certain aspects of their negotiations with Standard Chartered, later had the bank admit to a mere $133 million in bad conduct and pay $327 million in fines.

Now Warren and the men she is up against know full well that the regulators can bring banks to heel any time they want to. The treat of the loss of key licenses or access to Fedwire, the Federal Reserve’s dollar clearing services, would be a death knell to too big to fail banks. So would a criminal prosecution, since many types of customers are required to stop doing business immediately with a firm that has been indicted. That is why the toughest, most litigious CEO in recent history, Hank Greenberg of AIG, has to step down when Eliot Spitzer threatened to prosecute AIG.

So why do the officials refuse to entertain this conversation? Frankly, I don’t think it’s so terrible to admit they can’t prosecute big firms, because you don’t need to do that to change behavior. You need to start getting executives thrown out and individuals sued and prosecuted. And the threat of prosecution or the loss of a license is sufficient to force action. It wasn’t all that long ago that the authorities were willing to do that in the US. Salomon Brothers, the biggest bond deal in the world, had its CEO, vice chairman, general counsel, and a senior trader all depart in 1992 when it failed to tell the authorities that it had failed to rein in a trader who had been ordered to stop gaming Treasury bond auctions. And in the UK just last year, the Bank of England forced Barclays to get rid of its chairman, CEO, and president after they dared trying to discredit a Bank of England official during the Libor investigation.

It thus appears that the regulators are afraid of or unwilling to flex their muscles. Can’t jeopardize our future revolving door payout, now can we? If that is indeed the real impediment, it only strengthens the case for cutting the banks down to size.

Now to the video. Watch how no one there is responsible for anything Warren is interested in discussing!

The first person to respond to Warren is Donald Cohen of Treasury who is Undersecretary for Terrorism and Financial Intelligence. You’ll see him take credit for the HSBC settlement (notice the “we”) but then backpedal massively when Warren suggest that Treasury would have anything to do with a decision to pull bank charters. Suddenly Treasury has no authority and must defer to bank regulators. Huh?

First, as Warren points out, Treasury is the lead on OFAC matters. Second, the Treasury Secretary the chairman of the Financial Stability Oversight Council, so he presumably takes the lead role (and if Geithner is any guide, has the real say) in determining what sort of actions might produce too much systemic risk. As Sheila Bair described at length in her book Bull by the Horns, Geithner neutered her efforts to force management and other changes on Citigroup. And nationalizing Citi was an active topic in the press through early 2009. Bair didn’t need to cudgel Citi with the crude instrument of a license revocation; with the bank in as bad shape as it was, it needed plenty of breaks from its regulators and there was every reason to expect full cooperation. Yet Geithner was firmly opposed to meting out any meaningful punishments and there’s no reason to think a Lew Treasury will be any different.

By contrast, if you read Andrew Ross Sorkin’s Too Big to Fail, you’ll see that Paulson got the regulator of the GSEs, then OFHEO, headed by Jim Lockhart, to go along with forcing them into conservatorship. And it was Paulson, not Lockhart, who gave Fannie and Freddie their marching orders. Freddie’s management seemed to accept the inevitable, but Fannie’s management was stunned and its counsel, uber bank lawyer Rodgin Cohen, was up in arms. Their reflex was to fight (their view was Fannie was sound enough to make it. but Paulson was of the view that the market would not differentiate between Freddie and Fannie, and if he put Freddie into conservatorship, Fannie had to go to). Paulson made it quite clear he was putting Fannie into conservatorship whether its management and board agreed or not, and they quickly came around to his point of view.

Fed governor Powell is utterly disingenuous. His answer is Catch 22. The Fed won’t revoke a bank’s license until it has been prosecuted, which it says is not its job. That’s awfully convenient, since an indicted (large) bank is a dead bank. Not controversial to think about pulling its charter then!

Well, what about criminal referrals? Somehow that phrase does not seem to be in Powell’s vocabulary. He virtually disavowed that the Fed has any regulatory authority (“we do monetary policy, that crime stuff is over there”). And he knows full well that once a bank is indicted, what happens to the license of that entity (if it is a major one) is an afterthought. So the Fed’s answer was baldfacedly clear: they never think it is appropriate for them to entertain the question of prosecuting a bank. The most they do is answer questions if the DoJ rouses itself. If you look at Warren carefully during this interaction, you can see her contain her incredulity and make her closing comeback.

The “oh, it’s the DoJ’s job” is particularly rich since we know that Federal prosecutors spend sleepless nights worrying about bank counterparties and employees, not abused homeowners or victims of drug kingpins. Recall this pious speech by Lanny Breuer:

In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects. Sometimes – though, let me stress, not always – these presentations are compelling. In reaching every charging decision, we must take into account the effect of an indictment on innocent employees and shareholders, just as we must take into account the nature of the crimes committed and the pervasiveness of the misconduct. I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake. And, in some cases, the health of an industry or the markets are a real factor. Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.

Now where do you think Breuer got the idea that global markets might be affected? Oh sure, any big player under the hot lights will undoubtedly say that. But you can bet he got confirmation from Federal banking regulators. Do you think for a nanosecond if someone at the DoJ actually were to have gotten serious about going after HSBC, or even just some of its executives, that the Geithner Treasury and the Bernanke Fed would have sat pat? You can bet, as they did so visibly and aggressively with Lawsky, they would have pressured him to back down.

Warren deserves kudos for making the best of a very constrained medium to put pressure on public officials. But she can’t do a Ferdinand Pecora in seven minute interludes spread out over time. It’s good to see her give voice to pent up public frustration. But the jury is still out as to whether she can use her bully pulpit to get badly needed, long overdue reforms.

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67 comments

  1. F. Beard

    It’s odd and sad how many people wish to save banking from itself – as if it deserved saving. Yes, it’s given us some material progress – at the cost of the Great Depression and WWII and the current distress. But it has also divided society into capital and labor and labor is getting an increasingly short end of the stick.

    1. from Mexico

      F. Beard says:

      [Banking has] given us some material progress – at the cost of the Great Depression and WWII and the current distress…

      The power and reach, and deceptiveness, of the transnational banking cartel is so vast and omnipriesent that one is tempted to reach for the metaphor of Descartes’ deceiver god to describe it: a God who is an evil genius or malicious demon (genius malignus) who is supremely powerful and intelligent, and who, according to Descartes, “has employed all his energies in order to deceive me.”

      Standard Chartered’s dealings with the enemy harken back to something that came up on one of yesterday’s threads. Thorstein Veblen alleged that the intent of the Treaty of Versailles and the League was to make the world safe “for a democracy of absentee owners.” And in order “to make the world safe for a democracy of investors — the statesmen of the victorious Powers have taken sides with the war-guilty absentee owners of Germany and against their underlying populations.” The “Democracy of Property Rights” must be made safe “at any cost,” Veblen asserts, including the reinstatement of “the reactionary regime in Germany.”

      http://www.elegant-technology.com/resource/KEYNES.PDF

      The dictatorship of the transnational banking cartel, therefore, according to Veblen, had become the Holy Grail — the alpha and the omega — of the leaders of the Great Powers.

      Guido Preparata uses Veblen as a jumping off point then to demonstrate just how inextricably intertwined post-Versailles financiers from the Great Powers became with Hitler and the rise of Nazism.

      http://www.atimes.com/atimes/Global_Economy/NF30Dj03.html

      While I think Preparata goes over the top in attributing intent and motive, his case that the rise of Hitler would not have been possible without the aid and support of the transnational banking cartel is on solid ground. And as he says:

      I somehow thought that if we debunked one by one the most militant myths of Liberal imperialism – the sudden and allegedly inexplicable rise to power of Hitler being the chief one – one could pull the wool off people’s eyes and fashion thereby, and gradually, a clime of informed dissent against the terrible mayhem of this “War on Terror”.

      1. Susan Pizzo

        I have the book – “Conjuring Hitler.” I think Preparata makes a convincing case for the agency and intentionality of the international banking cartel, then and now. In fact, I would go so far as to say the transnational money powers have done their best over 40 years to recreate a global debt situation very comparable to post-WWI Germany, using capital flight and monetary policy as methods of punishment and control. The immiseration of Greece is hardly an accident. They know better. They could restore balance and equality. That they have chosen not to is all the evidence we need that their interests and ours have diverged to such an extent that they must go. One way or another. Because after the debt came a strategic hyperinflation, followed by structural adjustments, Hitler, and Holocaust. Take a look at our burgeoning security and surveillance state, reflect on the secret Fed bailouts and QE programs that have yet to help Main Street, listen to Chris Hedges on sacrifice zones and inverted totalitarianism, and ask yourself what is the logical path from here?

        You might find Kim Phillips-Fein’s book “Invisible Hands: The Businessman’s Crusade Against the New Deal,” the Heritage Foundation’s Mandate for Leadership series, Lewis Powell’s infamous memo to the US Chamber of Commerce, and recent reports on the activities of ALEC of interest as documentation of collusion by the powerful against the rest of us…

  2. John

    You have to get a good laugh when you see State or county prosecutors get up and say “We have to prosecute this case, as it’s a violation of law.” Referring of course to a case where an ordinary citizen was hauled in for something, anything. But then, if that someone being prosecuted was a corporation or officer thereof, or even someone working for the same, why there can’t be any prosecution, no matter how large the crime. Whoever can’t recognize that corporations have been given license to steal, is surely blind. In fact the whole culture of capitalism hinges on that very point. Take that fact away, and the fat bastards with suits and ties would have to actually do some real work to survive.

    1. McMike

      I live in a county that has suffered under years of an obstinate pinched faced DA. He pursued almost a caricature of piling-on of charges for any offence. The result was gumming up the courts with a backlog of bad cases and questionable conduct. Any calls for leniency, proportion or even pragmatism was met with howls of outrage from the right, accompanied by warnings of a descent into sinfulness and anarchism if we send signals through the system that crime is okay.

      The congnitive break on the right in the matter of law-n-order values is one of the more notable gaps in right-wing thinking.

      For example, one of the major complains we hear on the immigration issue is right wing canards about the message amnesty or normalizationsends, or about rewarding illegal conduct.

      1. Ms G

        The cognitive dissonance (or rather, inconsistent enforcement of the laws against the 99.9% vs. the .01%) is not limited to republicans or “right wingers.”

        It is a “gap” fully entrenched amongst democrats or progressives or whatever the heck they call themselves today. Obama’s DOJ is Exhibit 1. The 5 District Attorneys’ Offices and 1 Attorney General’s Office in New York City are, collectively, Exhibit 2 (for local examples).

        There is no reason why defense attorneys should not start to assert claims of unconscionability and violations of due process in the face of this now brazen pattern of unequal enforcement of criminal and debt laws.

        1. McMike

          Oh indeed. Party Dems are having a hard time recognizing the fact of their party’s utter sell-out.

          But don’t kid yourself, there are plenty on the left who recognize a DINO when they see one.

          However, it’s Friday, so let’s not open a Nader/Green party debate thread.

          1. NotTimothyGeithner

            Many of the Obot/partisan Democrat types haven’t been sold out. Many are just invested in a bizarre tribal feeling. They seem less terrible than the Republicans because the GOP has set the bar so low.

            The myriad of excuses (The President isn’t all powerful; its all part of the plan; this President is facing titanic opposition*) aren’t meant to make excuses for the President or some random sellout. I think ts a deflection on their own poor behavior. Whether its from just being a lazy citizen and not paying attention to a tacit acknowledgement that they like Democrats because they are Democrats or Obama because he is such a swell guy, it doesn’t matter because they haven’t been sold out as much as they want to avoid acknowledging they are poor citizens.

            They can’t recognize the sellout because there was no sellout. The average dumbass voter was sold out, but the boisterous Obot-types (Pumas, Kos fanatics, and so forth) should know better as they have access to information. The issue is they don’t care because Obama, JFK, Hillary, Bill, Bobby, Teddy, and even Kerry for being a manly man make them feel good just by being. Their policies and behavior never mattered.

            *The Republicans didn’t recognize SP was a blithering moron. They can easily be outwitted. The failure to do so is a sign of complicity or at least support of the status quo.

    2. traveler

      “Whoever can’t recognize that corporations have been given license to steal, is surely blind.”

      To recognize this requires a corresponding indictment of the state and that’s the sticking point. The faithful can’t handle it. Pile fact on fact – they simply retreat into denial.

  3. arby

    The conglomerate media ignored this. It takes a lot of courage to ask those questions in that setting. In Committee, Her job is to ask intelligent questions and be persistent. She performed admirably. Let’s see if she will take this point up as an amenment to a relevant Committee bill or tack it on to some measure on the floor. Since she asked their views, I assume she has one herself and as a lawmaker she can proffer that as a law to bind these guys “to automatically seek the death penalty on the third civil fine.” Three strikes and you’re out. (This is just my line in the sand.).

    1. sierra7

      On your thread about asking pertinent Q’s:
      Many times legislators in these “hearings” ask certain Q’s just to get the witnesses on the record with their answers.
      They almost already know what kind of answers they will get because of the individual personalities testifying, but getting their answers on the “official” record is important.
      I don’t have enough “kudos” for Elizabeth Warren…..(along with others such as Sheila Bair, Brooksley Borne, Ralph Nader etc….)

  4. Fraud Guy- Also

    As I have mentioned before, a lawyer friend represents some of the big banks on anti-money laundering issues. He has told me that there is an explicit understanding between the U.S. banks and the feds that the banks won’t be prosecuted for non-compliance with AML rules so long as they are proactive in turning in their customers for violating those rules. According to my friend, non-U.S. banks are not eligible for this deal, which is why you see the feds act much tougher toward them.

    1. sgt_doom

      It goes waaaay beyond any shilling for patriotism, Senator Warren is the ONLY acceptable presidential candidate.

      Period!

      Some years back, when she unloaded on those phoney-baloney “public-private partnerships” it was obvious Warren is the Real Deal.

      After Barack Hoover Obama has stood before the American public and repeatedly lied his amoral butt off, proclaiming that the banksters “broke no laws” (but he’s a constitutional law expert!!!) while all the investigations have been done, and JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, et al., have individually committed millions of felonies by filing falsified affidavits and mortgage foreclosure documents, and none of those crooks have gone to jail, there is only one conclusion reached about the Wall Street operation out of the White House — Cheney, Bush, Rumsfeld, Obama, Holder, Biden must all face trial for treason!

        1. ambrit

          Mr Strether;
          Isn’t this essentially how the present POTUS got started? Look at the declining standards of political discourse. Any ray of sunshine into a dank fetid cell will look like the Second Coming. Besides, who else of similar stature is floating around right now? (For the Centre of course. I use the old un-redacted Overtons’ Window of course.)

      1. Really?

        Hate to break it to you, but Presidents are bought, sold, deified, or crucified just like any other market commodity. Obama ain’t nothing like what he says he is, and neither will any other mouthpiece for the imperial order who manages to get elected be either. The fix has been in for decades (at least) now.

      2. nonclassical

        …agreed-from the “professional left”, as in EDUCATED to a degree we don’t blindly follow-support bushcheney bushitters or bushbama bushitters…

        Lambert-this is beyond important at this point…Warren’s positions are transparent…

  5. McMike

    It seems to me we need to create an alternate revolving door system – well-funded think tanks, class action plaintiff firms, book deals, progressive lobbying firms, and university posts that are specifically slated for regulators and politicians who are willing to hold to their principles while in office.

    That way, they can land on their feet after doing their time in the grinder. Being willing to take on the system comes with tremenedous personal and professional cost. It would be possible to lighten that load a bit, by creating a system of support infrastructure for those people who serve the public well.

    In the end, it would not even cost that much. (I mean, relatively speaking). An endowment, and even a voluntary system of targeted job creation, would go a long way towards countering the allure of the crony revolivng door system, and might attract a few more regulators to come out into the light.

    1. NotTimothyGeithner

      The issue isn’t a “counter” revolving door which will inevitably be just as corrupt as the current one. The issue is there is a revolving door at all. If the private sector can afford to buy regulators, then there are two problems. One, the regulator is underpaid/overworked in a genuine way. Two, a person can be paid so much without being taxed that throwing a pretty reasonable deal such as being a federal regulator makes too much financial sense.

      Then of course it goes to who watches the watchers. The elected officials of the United States could make it very difficult for the regulators to misbehave while accruing names for themselves which would lead to book deals, chairmanships, and whatever they wanted because popularity is a great currency.

      The real problem is the freshman Senator from Massachusetts is asking a Dick and Jane question every Senator should have asked 5 years ago. The banks are set up to be wealthy beyond the dreams of Midas anyway. Stealing on top of it should be a no-brainer for the Congress.

      Warren’s questions to the banks shouldn’t be applauded because these are the questions which have been raised for a number of years. They have appeared in the MSM (not as much as they should, but the media in this country has always been stenographers for some interest), but the electeds have been MIA. The issue is where is the rest of the committee besides Warren. They need to be hammered for what should be considered minimal acceptable behavior.

      1. McMike

        Well, I agree that we would be better off without a revolving door. But the fact is, monied interests will always find a way to corrupt the system.

        The corporate right has built a massive system that trains, develops, supports, promotes, and employs its assets and advocates. It is both a “farm team” system and a retirement/reward system. If a politician or regulator plays ball, they are nearly guaranteed to land on their feet, and some even get rich. And if you fall on your sword, you will be taken care of.

        The opponents of corporatism have no such system. We need to develop and support strong team members, and help them when they stick their necks out.

        As it stands now, sticking your neck out is a one-time gig that assures poverty and alienation.

        1. Ms G

          One cool thing, for starters, would be to have a Koch-level funded foundation that would support a true Fourth Estate press.

          Too bad George Soros is too much of a coward safeguarding his personal financial interests whilst pretending to be a “human rights” advocate.

          1. NotTimothyGeithner

            The problem with a reverse Koch effort, not merely a competing effort is the Kochs are using their money to make more money ensuring they have more and more.

            The result of the anti-Koch efforts would likely result in less funds for the backers almost immediately.

          2. Ms G

            My idea hinges on the premise (simplistic? utopian?) of one good billionaire to simply fund all of the real journalists struggling to exist outside of MSM through a neutral, central foundation — the key of such an effort, of course, would be that the “good billionaire” (or two) who would support such an effort with (1) no strings attached at all, (2) no scheme to monetize any aspect of it (i.e., with no self-interest other than a desire to do what is just).

            A man like Soros does not need to make another penny to live very well. And yet it is clear that he will hold out until his last breath, doing “philantrhopic works” only to the extent that his means of making even more money are not hindered.

            Therein lies a truly shameful reality.

        2. nonclassical

          …not if $$$$ is deemed to be PROPERTY rather than $peech…(PROPERTY, which it is..)

          that’s where focus needs to be directed..

    2. rob

      Too bad the reality is what happened to denis Kucinich…he is ridiculed,gets nothing but negative slant media coverage,and is pigeonholed into being a “quack”…then has his district “un-drawn”..and then he is out.A public official who has consistently done the right thing….And now what?

      1. Really?

        Doing the right thing always comes with a price. The reward is doing the right thing in and of itself. And in a society that worships money, greed, and power it should come as no surprise that virtually no one does it.

  6. Dr. Pitchfork

    “But you can bet he got confirmation from Federal banking regulators. Do you think for a nanosecond if someone at the DoJ actually were to have gotten serious about going after HSBC, or even just some of its executives, that the Geithner Treasury and the Bernanke Fed would have sat pat? You can bet, as they did so visibly and aggressively with Lawsky, they would have pressured him to back down.”

    Exactly. I made a similar point on The Daily Bail earlier this morning. Treasury and Fed officials claim they have no authority to be involved in prosecutions, not even the authority to have an opinion(!), and yet it is well documented that those same officials (e.g. Geithner) have already involved themselves in conversations about prosecutions. Namely, to ensure that the DOJ or state AG’s NOT prosecute known crimes.

    Warren could have trotted out a LONG list of FED-Treasury-DOJ collusion when they’ve wanted to avoid a proseuction. She could have totally called BS on that score.

    1. sgt_doom

      Sure, if she had an unlimited amount of time, but each of the senators’ time allocation is quite finite.

      And Huey Long still holds the record for the filibuster, no matter what the lying newsies spew forth!

    2. TitusPullo

      Agree, it’s collusion. Senator Warren answers are best found on the Senate Intelligence committee:

      It wasn’t just Lawsky who was shut down from prosecuting HSBC. In June 2010 (prior to Lawsky’s cease and desist order) William Ihlenfeld – the U.S. Attorney in Wheeling, West Virginia- had been told to stand down in by the Department of Justice; just as they were preparing to indict HSBC for as many as 175 counts of money laundering .

      Prior to both stand down orders, UK investigation began in early 2010 (and concluded in 2012) when UK Revenue and Customs, Britain’s tax authority, investigated more than 8,000 accounts held at HSBC’s subsidiary in Jersey (the largest island in the English Channel – and a Tax Haven); the accounts contained about GBP £669 million (USD $1.2billion) A majority of the accounts were held by British citizens, nearly 4,000 belong to citizens of other countries – but more than 100 Americans held accounts with suspected links to CIA front companies.

      The Senate Permanent Subcommittee on Investigations released a report alerting government agencies that HSBC allowed clients to move funds from countries that includes, Mexico, Iran, the, Cayman Islands, Saudi Arabia and Syria ($7 billion of dollars from Mexican drug cartels and 25,000 Iranian transactions totaling over $19 billion, in just one week). Saudi Arabia (nation to all 9/11 Al Qaeda terrorists), Iran (declared a nation of state sponsored terrorism by the US) and Syria – suspected of having ties to Hezbollah and Hamas – Islamist groups that the U.S. considers to be terrorist organizations.

      This alert initiated US agencies into the investigation which, besides the DoJ, included the US Attorney’s office, the Office of the Comptroller of the Currency, and the Federal Reserve Bank of Chicago. However, oddly, HSBC received requests for information only from the DoJ and the Attorney’s Office, which focused on the bank’s global banknotes business and its “foreign correspondent” unit (both of which move money globally -the bank’s global banknotes business on behalf of its own clients, often from central bank to major domestic banks – now shut down. The foreign correspondent unit is, still, transmitting company funds to countries where they did not have bank accounts).

      The DOJ’s lack of prosecution for HSBC criminality is likely due to the fact that HSBC has been working with and on behalf of US agencies (CIA, et al), explicitly. Much in the same way as, in the 1990’s, the then 7th largest bank in the world, Bank of Credit and Commerce International (BCCI) served as (to cite, Sen. John Kerry Intelligence Subcommittee report) “a Federal Express service” for CIA weapons, drugs, gold and currency for smugglers all over the world, it helped to finance and ship Scud missiles from North Korea to Syria and Chinese Silkworm missiles to the Middle East. The CIA used BCCI branches in Europe and a front company in Warsaw to trade in weapons to such a degree, that CIA had several checks drawn on a BCCI account from Manucher Ghorbanifar, an Iranian arms dealer who played middleman during the Reagan administration’s covert attempts to negotiate the release of U.S. hostages in Lebanon with the Iranian government (Iran-Contra).

      Kerry’s’ subcommittee hearings cited a 1986 CIA memo, five pages long and stamped SECRET (followed by a much more detailed 1989, ‘SECRET’ 30 page report) summarizing the agency’s knowledge of BCCI’s activities – including the illegal acquisition of First American Bankshares. Both memos were prepared by the CIA’s Directorate of Operations and sent to various government agencies including: the Treasury Department, the Federal Reserve Board and the Justice Department. The CIA memos advised each agency that BCCI was involved in money laundering, “narcotics financing,” gunrunning and holding large sums of money for terrorist groups; had established a so-called black operation and that a bank-within-a-bank consisted of “secret, managers’ accounts” used to enable favored clients to move money without attracting the attention of international banking authorities. Regan’ and his Attorney Generals (Edwin Meese and Dick Thornburgh) plead plausible deniability. None of the agencies carried out any meaningful investigation and no senior US- BCCI bank employee was indicted.

      Flash forward to election year 2012. This administration looking to line itself up for easy financial services, pre-election prosecution (to counter the ‘soft on banisters’ criticism) has Holder and the DOJ investigate HSBC for three years – it hands the administration an election year ‘October surprise’: an open-and-shut case to prosecute one of the biggest Wall St. banks.

      Though the ‘November Surprise’, occurred when, on the eve of Holder handing out indictments, HSBC tells the DOJ that, actually, all of this nasty money laundering business had been for, and on behalf of Uncle Sam’s Praetorian Guard (and it has the ‘indemnity’ paperwork to prove it); HSBC had simply administrated the financial transactions of the CIA, its friends and its clients (allies and enemies alike). It had been sanctioned and approved by the consigliore of the previous administration and this one – just ask Leon Panetta and that new guy, Petreaus.

      The DOJ had stumbled upon its own Bush era long Iraq-Al Qaeda-Los Zetas-CIA-Afghanistan-Drug-type clearing house. The October Surprise had to transition itself through a ‘November nonevent’ into a ‘December Dud’. Because, the political jeopardy for this administration (or an indicted HSBC) announcing that the Pantheon of Wall Street is indeed a bastion of corruption, but it is this (and previous) administration’s sanctioned corruption, was likely to be less damaging than announcing: ‘yes, banks and the bankers are bad, we tried our best, they are still too big to fail or jail, it’s their fault, let’s discuss how bad this TBTF/J problem is and let’s not look at the underlying basis of HSBC’s actions beyond their marginal profit motive.

      Likewise, HSBC “failed” to monitor $60 trillion in wire transfer and account for activity from 2006 – 2009. How does any bank perform any transaction with “rogue” and “enemy” states, from within the borders of the USA and UK, without the CIA/NSA and MI6/DI, respectively, being aware of it?

      HSBC, today’s BCCI

      1. rob

        Yes!
        That is just the sort of business as usual that gets in the way of every theoretical action.Things that are too damaging, can’t be told.And whatever has to be swept under the rug to make sure the real dirt doesn’t come out for forty years or so..so be it.
        If there was ever a chart to show what good the CIA and their wall st connections have done that is good, compared with what they have done that is bad for the entire world and especially america…that agency and all the other alphabet agencies would be mothballed.Since the OSS yahoos who became the CIA and the others, and their familial ties to the wall st behemoths.in the days after WWII, with operation:paperclip,artichoke,tp ajax,and all those..now. have perpetually fomented wars, proped up tyrants who murdered countless millions, all the while extracting wealth from everyone….the drug wars,where the cia was smuggling in hundreds of tons of cocaine into the US in the 80′s,milking the savings and loan industry,in order to pay for black-ops international crimes thru the 9/11 pre-text for a worldwide powergrab/deathblow to the republic that we have today.That is the darkside.The reality.It is the rot we have to cut out before it takes the whole organism,if it isn’t too late already.

        1. Nathanael

          As far as I can tell the CIA hasn’t done anything good for the US in its entire history.

          It has caused a *tremendous* amount of trouble, not least by preventing the orderly democratic transition of power in Iran in the 1950s.

      2. sierra7

        Bravo! TiusPullo!
        Not enough (intellectually challenged consumers) American citizens really understand this aspect of our government….
        Big Banks (and some small), Drug money, CIA, CIA Black Budget, “no” overssing by appropriate congressional elected officials, covert money for covert operations operating even outside the CIA (The Pentagon has something like 18+ “intelligence” operations alone) and money laundering.
        This is not a “new” story but TiusPullo gives a good overview.

        Book “False Profits” Peter Truell and Larry Gurwin is a good start…..and reading the source notes and following up on those…(Who the heck is going to do that?…and that’s what our Shadow Government depends on; also the money laundering banks)…

        “The Politics of Heroin” initially published in the couple decades ago is another eye-opener and will give another perspective on the “war on terror”, before that phrase become so popular by corrupt officials.

        Sometimes these stories are initially covered in papers like the NYT (the “US historical record”), but any followups are buried in the later pages in small print. The NYT can then say to critics that they did cover the story……but with no good follow up front page content.

        The same old story: “Follow the Money”

  7. Brooklin Bridge

    Her efforts are encouraging. I’m also keeping my fingers crossed that she will make a stink when Obamination finally gets his cuts to Medicare and Social Security on the floor. I’m less hopeful that anything will actually come of it.

    1. McMike

      Just watched the movie Bider 70. About civil disobedience and illegal/cozy BLM gas lease auctions. (He bid on gas leases with no intention of paying, a spontaneous action of protest for the fact that the lease process was both illegal and unethical).

      Notable in the film is how the Obama adminstration crushed this guy mercilessly through the “justice system.” Systematically denying him the ability to even present a defense, delaying his trial repeatedly, imposing 2 years prison time after years of delay on trial, calling this a financial crime and conspiracy, putting him in solitary confinent based on flimsy criteria, and blocking him on release from getting a job in social justice advocacy.

      Contrast this to a recent Federal settlement with gas companies that brazenly rigged bids as a matter of business practice, going so far as to put an agreement of collusion in writing, and refused to admit wrongdoing in the settlement. The settlement was just a “fine” of an amount that may or may not have restored the lease price to market levels in a true competitive bid – i.e. no fine whatsoever – and no one went to jail and they even got to keep the leases.

      One particularly sick twist to the leases DeChristopher bid on: he was right, the leases were ilegal, and after his act, the BLM reversed the decision and did not re-let the leases.

  8. Westcoastliberal

    Elizabeth Warren is courageous with a Don Quixote full-steam-ahead energy to go after the rot that has left our country in shambles.
    I just hope and pray she has 6 or 7 skilled/trained and unquestionably loyal bodyguards.

    1. sgt_doom

      And to anyone who questions Westcoastliberal’s comment, read Lance DeHaven-Smith’s Conspiracy Theory in America — a most enlightening book!

    2. Lambert Strether

      Anything’s possible. We’ve been conned before. There isn’t anybody who’s worked with Obama that’s come away looking better than they did before they associated with him. Warren may be the exception. If so, two question sessions in Committee don’t constitute proof.

      1. Nathanael

        The bodyguards and food tasters aren’t merely to prevent assassinations. They’re also to prevent *deniable* assassinations.

        If a prominent “good guy” gets openly assassinated, that generally has massively positive public relations results. If it’s disguised as a “small plane crash”, then it doesn’t. People with enough paranoia, bodyguards, etc. can make sure that any assissination attempts are *exposed for what they are*.

  9. Richard Davet

    Does she know the Oscars are over with this year?

    In all this is would look a little strange if they were all tap dancing in unison like the Rockettes wouldn’t it?

    1. the idiot

      Elizabeth Warren will be one of the most heartening and interesting things to watch over the next several years. It’s hard to imagine that she could maintain her energy and spirit in the face of such tired, weighty hubris, but I believe if anybody can, it’s her. If Warren can’t escape Washington without succumbing to the cynical foot washing of the corporate elite, then maybe there is no hope.

      1. Lambert Strether

        Well, we’ll have a good indication when she comes out against Obama’s cuts to social insurance programs. If she doesn’t, she’s as corrupt as every other Democrat.

        * * *

        I understand the desire to believe, but… Wasn’t there a whole campaign based on… What was it now, “hope and change”? Eight years ago? By a fresh and charismatic figure? Who wasn’t a white male? This particular Lucy is going to be very wary of that particular football.

        1. the idiot

          Lambert,

          I would consider myself very cautiously optimistic, or optimistically cautious. Agreed on the austerity measures being a good benchmark. Outside of her economic sensibilities and TBTF in particular, I really don’t know much about her other views in relation to progressive issues. But at the end of the day, she did get elected to Senate, which means she probably had to sell/lease/rent her soul to somebody.

          1. Nathanael

            It was the US Senate. The number of progressives in the US Senate is less than 5, speaking generously.

            There are more progressives in the US House, but there’s nothing *they* can do to support a filibuster in the Senate.

          2. Nathanael

            FWIW, I’m betting that the upcoming political realignment will have Rand Paul / Ron Paul types — libertarians with a nasty streak of goldbuggery — aligned with the “left wing”.

            I haven’t figured out what the unifying force in the other party will be. (Our electoral system, thanks to Duverger’s Law, guarantees that there will be two parties. They aren’t going to look anything like these two.)

  10. Blurtman

    David S. Cohen was confirmed by the United States Senate to serve as Treasury’s Under Secretary for Terrorism and Financial Intelligence on June 30, 2011. As Under Secretary for Terrorism and Financial Intelligence, Cohen leads the Treasury Department’s policy, enforcement, regulatory, and intelligence functions aimed at identifying and disrupting the lines of financial support to international terrorist organizations, proliferators, narcotics traffickers, and other illicit actors posing a threat to our national security. He is also responsible for directing the Department’s efforts to combat money laundering and financial crimes

    Prior to joining Treasury, Cohen practiced law for nine years at the Washington law firm Miller, Cassidy, Larroca & Lewin LLP, where he specialized in white collar criminal defense and civil litigation.

    Cohen received his J.D. from Yale Law School in 1989, and his B.A., magna cum laude, from Cornell University in 1985.

  11. readerOfTeaLeaves

    A video clip like this makes me think, “Maybe those Tea Partiers are on to something…”
    If government continues to delegitimize itself through such prevarication, obfuscation, gutless excuses, and robotic it’s-not-my-bailiwick stupidity as the DoJ types exhibit here, we’re headed for some very dark and tumultuous times.

    This is Political Delegitimacy 101.

  12. Laughing_Fascist

    Yves post mentioned the reason why regulators refuse to go after individual executives: it may be that they don’t want to jeopardize their future revolving door payout. No less a factor is the 800 pound gorilla known as the White House. A regulator who actually tried to go after a senior executive in a big five bank knows that one of the big WH enforcers would drop the regulator off of a Manhattan skyscraper (after first dangling him or her on the edge for laughs).

    The WH enforcers (not to be confused with regulatory enforcers) are well known but we should talk about them in comments sometimes to remind ourselves why there will not be a substantive enforcement action while Obama is in office.

    Gene Sperling is a friendly looking guy. And now Obama’s # 1 economic adviser. He’s been around for awhile. What do you suppose Sperling (who hesitated not one minute to talk trash recently at Bob Woodward, a person with power to spill ink everywhere) would do if some $120k a year regulator type got it into his/her head to investigate a Citi or Goldman senior exec (or even a low level exec)?

    A quick look at Sperling’s background might shed some light. Sperling teamed up with Larry Summers in ’99 when Summers was Treasury Sec under Clinton to design the legislation that effected the demise of Glass Steagall. So now banks and securities firms sleep in the same brothel. It was such a stroke of genius to leverage economies of scale (and destroy the national economy) that Sperling was brought into the Obama administration immediately in JAN 2009.

    But I am getting ahead of myself. In the year prior (2008), Sperling was paid $887,000 over 12 months by Goldman Sachs. Why was he paid this astronomical sum (besides the obvious reward for Glass Steagall)? OK don’t laugh. From Wikipedia:

    ‘My sole work for Goldman Sachs was as lead consultant on the creation, design, and initial implementation of ‘10,000 Women,’ their $100 million philanthropic effort to give business and leadership education to poor women around the world,’ Sperling said.”

    Its comical (ironical, malevolent, choose your word) that Goldman has a “philanthropic effort” for the poor that results in an $887k payout for some advice. But that is a mere collateral issue. Perhaps Goldman was betting that Obama would win and Democrat Sperling would be back in the Washington game. Defending the interests of the righteous (i.e. his major paymaster) against big bad regulators. The bet paid.

    But that is not the end of it. “Sperling’s disclosure shows he supplemented his salary through a variety of consulting jobs, board seats, speaking fees and fellowships, to bring his total income to more than $2.2 million in the 13 months ending in January [2008].” http://www.bloomberg.com/apps/news?pid=newsarchive&sid=abo3Zo0ifzJg

    Board seats…speaking fees…the man is making millions without really working. It’s the sort of beneficent kindness from Wall Street that Sperling will likely still be talking to his granchildren about 30 years hence. And it’s the sort of money Wall Street would not pay unless they were certain Sperling is their man.

    So back to that $120k regulator. When Obama brings a guy like Sperling into his inner circle, the very same guy who broke the back of Glass Steagall, one of the actual on the ground architects of financial Armageddon – all regulators know exactly what it means. No regulatory staffer will commence that investigation. Whatever you do don’t underestimate the regulatory crowd’s fear of White House insiders. Because the regulatory staffers boss, and his boss… all the way up to the head of the agency do not want to end up being called to a late night meeting by an enforcer (like Sperling). And find a public service career suddenly over, and life dangling over the edge.

    1. the idiot

      Laughing_Fascist, all I can say is “wow!” Thanks for that comment and link. I guess the old adage “watch what they do and not what they say,” is even more apt now regarding Obama.

    2. Ms G

      You’ve done great service offering us this post. Thank you.

      And of course you are exactly right. It is a pyramidal structure controlled through a very tightly-leashed group of enforcers.

      In the face of which, public servants with a desire to do their job in a manner that serves the interests of the American public, do not have a chance.

  13. LucyLulu

    While it’s great that Sen. Warren is calling out our regulators who don’t regulate and prosecutors who don’t prosecute, did anybody else catch that Sherrod Brown and David Vitter are co-sponsoring legislation to end TBTF? They both gave presentations yesterday to the Senate on the SAFE Banking Act, which was originally drafted by Brown and Ted Kaufman. It will break up megabanks to limit systemic risk and the inevitable need for future taxpayer-funded bailouts while reintroducing a healthy market back into banking by allowing medium sized banks to compete. Their legislation has input from drum roll…… Sheila Bair, Richard Fisher, and Tom Hoenig. It is claimed to have broad bipartisan support including that of George Will and Dan Tarullo. If all their shenanigans end up with the banks being broken up, we definitely will have to get together to celebrate the victory.

    You can read more at Senator Brown’s website:
    http://www.brown.senate.gov/newsroom/press/release/brown-delivers-major-address-on-efforts-to-end-too-big-to-fail-policies

  14. Paul Tioxon

    Since there is celebrity terrorist in town to be tried, not too far from the NYC Fed and Wall St, will there be an OFAC list of banks who aided and abetted in the charges of conspiring to kill Americans by Osama Bin Laden’s son-in-law, Sulaiman Abu Ghaith?

    It would seem some enabling actions by financial institutions would have to be use in a conspiracy of this magnitude. Would this be a high enough level transgression to get a bank investigated? Prosecuted? License revoked?
    Apparently, the structural importance of banking and finance is so critical to the social order of capitalism, the answer will be no. Banks are the pillars of the social order, the load bearing walls, and if removed the roof of society, the economy, will come crashing down upon all of our heads and give us all a big headache. Perhaps it is time to condemn this structure as unfit for human habitation, and to move out into a safer structure.

  15. thomas

    Sen. Warren with limited tme asks a very simple question. she perhaps knows it will not be answered but rather evaded. the answer is YES, money laundering is a crime and should be treated as such. The individuals (non-bankers) who deposited the money into the bank are already in jail. But, the non-answer does answer the question Sen. Warren was probably more interested in. Are you part of the problem?

  16. Robert

    Pretty obvious. The political and justice system has been hijacked by Wall St. Good luck getting them out with a bought and paid for craven and corrupt Congress, and a lackey President.

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