Friday, February 19, 2016

How big ...

The uneven size of financial systems 

If you compare the size of our nation's financial industry (by total
assets) to the rest of the globe, there's a very clear statement
to make: we're huge.  Perhaps too big?

Too big to fail (TBTF) was the term used when Wall Street finance crashed the world's economy in '07.  We've seen billions paid in fines, but the money went to the government, not to those who suffered loss.  Americans lost on average about $50K per capita.  The finance industry continues to grow, and no one went to jail. 

The industry is huge, but that's not necessarily bad, we're told by economists. And government. And regulators. And the Federal Reserve. They may be right, as the industry size must indeed match the nation's economy and trade. The concerns that have not yet been reasonably addressed, the size of individual banks and companies along with the practices and integrity of the participants.

'Crooked as a dog's hind leg' describes the finance industry in general.  Their influence now exceeds that of most countries, and their bottom line is winning, not serving.  That's troublesome.

Speaking of crooked, take HSBC for an example.  In 2012, the news breaks about one of the world's larger banks.  HSBC was knowingly serving terrorists and criminal cartels and had been for years.  "... the U.S. Justice Department granted a total walk to executives of the British-based bank HSBC for the largest drug-and-terrorism money-laundering case ever. Yes, they issued a fine – $1.9 billion, or about five weeks' profit – but they didn't extract so much as one dollar or one day in jail from any individual, despite a decade of stupefying abuses." (Matt Taibbi, the Rolling Stone, 02/14/13)

"They violated every goddamn law in the book," says Senate investigator Jack Blum. "They took every imaginable form of illegal and illicit business."  So much for soft-pedaling the problem.

So how many died, one might ask.  How many were robbed, how many lost days or years of their lives, how many suffered ... HSBC was knowingly laundering money for murderers and drug industry players.  They knew, and they did it anyway.  Lives were ruined, and people died. And from the U.S. Justice Department, they got a walk.  The fine HSBC paid went to the government, of course, and not a penny to victims or their families.  

"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."

A week later, Assistant Attorney General Breuer announced a similar wrist-slap against the Swiss bank UBS, which had just admitted to a key role in perhaps the biggest antitrust/price-fixing case in history.  The LIBOR scandal was a criminal rate­ rigging play that manipulated hundreds of trillions of dollars for the benefit of the bank. 

A reporter pointed out to Breuer that UBS had been found culpable in 2009 in a major tax-evasion case, and asked a sensible question. "This is a bank that has broken the law before," the reporter said. "So why not be tougher?"

"I don't know what tougher means," answered the assistant attorney general.

One or two such cases are bad enough, but apparently such practices are common (rampant) in the (global) financial industry.  (1) (2)   Prison would be appropriate, but they got a pass.  This is the picture today of our current financial industry, more powerful than nations, and our ineffectual government.  Nuts.