[December 10, 2012, 4:10 pm]
HSBC to Pay $1.92 Billion to Settle Charges of Money Laundering
It is important to realize that their December 10, 2013 story on the HSBC settlement was not critical of Holder, Breuer, and Geithner. The story’s first judgmental statement about the settlement is made in the third paragraph. I find the reporters’ conclusion preposterous:
“the settlement with HSBC is a major victory for the government.”
Please see my recent column regarding DOJ’s propagandists claiming that crushing defeats for justice represent triumphs. I find it astonishing that the media treats DOJ’s and Treasury’s “Beltway Bob’s” as credible.
The first paragraph of their story makes the central point I made in criticizing Geithner and DOJ.
“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.”
Here is NPR’s “Clarification” of my statement that they censored out of the report at the request of Geithner’s aides:
“In an early radio version of this story, a former regulator was quoted speculating that Treasury Secretary Timothy Geithner did not want to put HSBC out of business.”
It’s interesting that accurately noting a report in the NYT now constitutes “speculating.” Does anything think that DOJ decides without Treasury input what events would “destabilize the global financial system?”
The December 10 story stated that Treasury had been involved in the discussions and that Treasury remained concerned that indicting HSBC could destabilize the global financial system.
“Four years after the failure of Lehman Brothers nearly toppled the financial system, regulators are still wary that a single institution could undermine the recovery of the industry and the economy.
But the threat of criminal prosecution acts as a powerful deterrent. If authorities signal such actions are remote for big banks, the threat could lose its sting.
Behind the scenes, authorities debated for months the advantages and perils of a criminal indictment against HSBC.
Some prosecutors at the Justice Department’s criminal division and the Manhattan district attorney’s office wanted the bank to plead guilty to violations of the federal Bank Secrecy Act, according to the officials with direct knowledge of the matter, who spoke on the condition of anonymity. The law requires financial institutions to report any cash transaction of $10,000 or more and to bring any dubious activity to the attention of regulators.
Given the extent of the evidence against HSBC, some prosecutors saw the charge as a healthy compromise between a settlement and a harsher money-laundering indictment. While the charge would most likely tarnish the bank’s reputation, some officials argued that it would not set off a series of devastating consequences.
A money-laundering indictment, or a guilty plea over such charges, would essentially be a death sentence for the bank. Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its charter to operate in the United States, officials said.
Despite the Justice Department’s proposed compromise, Treasury Department officials and bank regulators at the Federal Reserve and the Office of the Comptroller of the Currency pointed to potential issues with the aggressive stance, according to the officials briefed on the matter. When approached by the Justice Department for their thoughts, the regulators cautioned about the effect on the broader economy.”
So, Treasury was involved in the policy debates. It “cautioned” against any indictment of HSBC. It viewed any indictment of HSBC as a “death sentence” for HSBC and countered the argument of some prosecutors that such a death sentence “would not set off a series of devastating consequences.”
Geithner was crafty, so after having his staff argue, successfully, over the course of months, that DOJ should not indict HSBC because doing so would cause the financial skies to fall, he refused to put this in writing. Geithner knew he had won the fight and didn’t want to leave his fingerprints on the charter of freedom for felons – the “too big to prosecute” doctrine.
David S. Cohen, the Treasury’s under secretary for terrorism and financial intelligence, said in a statement that –
“The Justice Department asked Treasury for our view about the potential implications of prosecuting a large financial institution. We did not believe we were in a position to offer any meaningful assessment. The decision of how the Justice Department exercises its prosecutorial discretion is solely theirs and Treasury had no role.”
I will do Protess and his colleague the honor of believing that they did not fall for this cynical, self-serving, and silly claim that “Treasury had no role” in the decision because Treasury lacks the competence to make “any meaningful assessment” of the impact of HSBC suffering a catastrophic failure. I will note two obvious categories of questions (neither of which the reporters appear to have asked). First, if Treasury is incapable of making “any meaningful assessment” of the risks that the failure of an SDI like HSBC pose to the global financial system – who is capable of making those assessments and did DOJ obtain their assessment? Second, why didn’t DOJ prosecute HSBC’s senior officers who led the massive frauds and became wealthy due to the frauds? Why did DOJ not even recover the wealth the senior officers gained by leading the second largest criminal enterprise in world history?
The December NYT story refutes Treasury’s claim that it had no involvement in the decision not to prosecute HSBC. It documents that they played a large role over an extended period. I was not “speculating” about Treasury’s involvement and their hostility to any prosecution of HSBC – I was citing facts I learned in part from the NYT.
The newest story by Protess in the NYT about Treasury’s convincing NPR to suppress my accurate criticisms of Geithner should prompt the NYT and NPR to review their coverage. NPR was conned by Treasury’s lawyers, who emphasized the formalistic truism that DOJ makes the formal decision whether to prosecute. I never said anything to the contrary that needed to be “clarified” or “retracted.” What I said, and was censored out of the broadcast at the instigation of Geithner’s aides, was not only accurate but far more important than the formalistic truism. I explained that Geithner’s views on the fragility of the SDIs led DOJ (or gave it the excuse) to make decisions that produced the disgraceful “too big to prosecute doctrine” that repudiates the rule of law and enshrines crony capitalism. I also explained to the NPR reporter that there was no legitimate rationale for not prosecuting HSBC’s senior officers who directed its criminal enterprises. I invite the NYT and NPR to explore these issues in interviews with me. They are important issues and the recent disclosure of documents from Geithner’s aides confirms the accuracy of my criticism and a sad chapter in Treasury’s successful efforts to censor its critics.