Too big to prosecute

On rare occasions, Congress actually does something right.

One such occasion was the handling of the investigation into HSBC Holdings PLC, Europe’s largest bank. In an extensive report and a blistering hearing conducted this summer, a Senate subcommittee uncovered a wealth of incriminating evidence against HSBC.

Unfortunately, rather than being forced to face a criminal indictment or plead guilty to violations of federal law, HSBC was slapped with a $1.9 billion fine. Not a single employee or manager of the bank was prosecuted.

According to the Senate investigation, the bank helped Iran circumvent U.S. sanctions with more than 25,000 transactions in a seven year period.

Additionally, HSBC subsidiaries helped launder money for Mexican drug cartels and Saudi banks linked to terrorist organizations. That’s right — HSBC was banking for Iran, drug cartels and terrorists.

The Senate subcommittee’s report was so damning that prosecution on behalf of the Justice Department seemed inevitable.

However, when the Justice Department decided on its action this past December, it was found wanting.

The $1.9-billion figure is even more of an injustice when compared to the amount of money HSBC earns. In 2011, HSBC made a profit of more than $16 billion, and its assets were worth more than $2.5 trillion.

It is important to keep in mind the HSBC scandal isn’t just some harmless white-collar scheme involving a few accounting tricks to make people more money.

This crime is more egregious than the reckless behavior of Wall Street firms leading up to the 2008 financial collapse that cost millions of people their homes and jobs.
This scandal involved life and death. By handling and laundering money for Iran, drug cartels and terrorists, HSBC’s actions perpetuated and enabled violence and death, and undermined the national security of the U.S.

For these reasons, $1.9 billion scraped off the top of HSBC’s one-year profits hardly seems adequate.

In our country, markets and government are interconnected. But in the past several years, there seems to have been a greater emphasis placed on protecting the bottom line of banks rather than upholding the laws of our country.

In the midst of the Great Recession, our government deemed some banks “too big to fail.”

That is, the cost of not stepping in to help these banks would have been so disastrous the government had no choice but to bail them out.

This same reasoning was used to justify the deferred prosecution of HSBC. The Justice Department concluded a criminal indictment would have doomed the bank and caused the country economy hardship.

This reasoning has led to an appropriate new phrase of “too big to prosecute.” Being too big to fail may violate some unwritten laws of economics, but being too big to prosecute defies written laws of the U.S. and undermines our justice system.