Bank Fraud: Underlings Arrested, Banks Too Big to Indict

December 12th, 2012
in econ_news, syndication

Econintersect:  The first three arrests have been made in London in connection with the LIBOR (London Interbank Offered Rate) rate-fixing scandal.  Three unnamed banksters-economist-cover-liborSMALLtraders were taken into custody Tuesday (11 December 2012).  According to the Associated Press the three were British nationals.  Reports have not revealed where the three were employed.

The arrests were made by London police in collaboration with the SFO (Serious Fraud Office) of the British government.  Other criminal investigations are ongoing around the world, according to Reuters, but the only arrests thus far are these in London.  Reuters specifically mentioned that investigations were underway "across Europe, the United States, Canada and Japan."

Editor's note: In the article that follows editorial comments are mixed with the news.

Follow up:

It has not been mentioned if the three arrested worked for Barclays Bank (NYSE:BCS) but that is considered likely because Barclays is at the center of the scandal, which may extend to at least 16 other large banks, and has been leading the way with regard to cooperation with investigators, according to the Associated Press.

Barclays has already paid fines of $450 million to U.S. and U.K. regulators in this matter.

In a separate case, a settlement has been announced in New York for HSBC (NYSE:HSB) to settle criminal fraud charges by paying a "fine" and other charges totaling $1.92 billion.  The charges concerned the failure of the bank to conform to legal requirements to prevent money laundering for clients doing business with customers in Iran, Libya, Sudan, Burma and Cuba.  In other words, these are fines for permitting the bank to commit felonies.  Reuters has said that HSBC is "too big to indict."

Click to watch Reuters video.


Additional civil penalties against HSBC were due to be announced later Tuesday.

According to HSBC is the fourth largest bank in the world based on total assets of  $2.7 trillion.  There are 15 banks with assets in excess of $2 trillion and 11 more with assets over $1 trillion.  Goldman Sachs (NYSE:GS) is 30th on the list with assets of $949 billion.

Based on past legal actions, too big to indict reaches down the bank list at least to #30 because Goldman agreed to a settlement of a major securities fraud case (Abacus) in 2010.  (See list below.)

Other failures to pursue criminal action of note would include:

  • Civil case filed in October against Bank of America (NYSE:BAC) seeking $1 billion for defrauding the government;
  • Agreement in September by Bank of America to settle securities fraud case by payment of $2.425 billion settlement;
  • Agreement in April by Bank of America to settle charges of fraudulent mortgage processing with the payment of $2.38 billion;
  • Settlement in February of mortgage servicing fraud cases against major U.S. banks with a collective payment of $26 billion in penalties;
  • Citigroup's settlement with the SEC (Securities and Exchange Commission) of mortgage-backed securities fraud charges with payment of $286 million in November 2011 - ruled “neither fair, nor reasonable, nor adequate, nor in the public interest” by an appeals court judge;
  • Bank of America agreed in January 2011 to pay $2.8 billion to settle claims it defrauded Fannie Mae and Freddie Mac; and

  • Goldman Sachs settlement for $550 million  in July 2010 to settle fraud charges by the SEC regarding the sub-prime mortgage backed security named Abacus 2007-AC1.  A lower-level Goldman exec awaits a 2013 trial in connection with this matter but no high level executives have been charged with any wrong-doing.

In spite of all the billions paid in penalties for fraud committed, the economic loss that resulted was much larger, in the trillions according to Bloomberg.  With total losses including penalties, fines and settlements amounting perhaps $200 - $250 billion (see "Mortgage Mess Liabilities Sap Banks"), banks and banksters are getting away with fraud on a grand scale by paying pennies on the dollar of total damages and totally escaping criminal prosecution.

The question raised previously is how far down the list does (TBTI) too big to indict extend.  The history described above indicates it goes down the top bank list at least to # 30 (Goldman Sachs).  Shown below for reference is the top 40 list from

Click on table to enlarge.


* The exchange rate on September 30, 2012
Last Modified: December 7, 2012

For the U.S., the top six banks (shown in top 40 table) hold 73% of all the commercial bank assets (approximately $13 trillion) in the U.S., using the 07 December 2012 data from the Federal Reserve.

Denis Santiago reported on the concentration of banking through the end of 2009.  He chose to use the benchmark of $100 billion in assets for classifying large banks in the U.S. (final entry below is from current data):

  • At the end of 2000 there were 7 such banks and they controlled 27% of all U.S. bank assets.
  • At the end of 2005 there were 13 such banks and they controlled 41% of all U.S. bank assets.
  • At the end of 2007 there were 17 such banks and they controlled 53% of all U.S. Bank assets.
  • At the end of 2009 there were 16 such banks and they controlled 56% of all U.S. bank assets.
  • As of 07 December 2012 just 6 mega banks control 73% of all U.S. banking assets.

A Mafioso organization could not have been more successful with any bribery corruption scheme.

When the data above is plotted it is clear how little impact the Great Financial Crisis (GFC) had on the rapacious aggregation of assets by the megabanks.  It could be said that the GFC was merely a zit on the face of oligarchy.


John Lounsbury


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