by William K. Black, New Economic Perspectives
In December 2013 NPR interviewed me about one the great disgraces of the Obama administration – its refusal to prosecute either the officers or HSBC for laundering roughly $1 billion over the course of the decade for Mexico’s Sinaloa drug cartel. The NPR story doesn’t name the cartel or inform the listener that it is one of the world’s most violent drug cartels, or that HSBC also routinely violated the money laundering laws on transactions involving tens of trillions of dollars, and covered up its numerous violations of U.S. sanctions on Iran and Burma.
The original NPR story presented my comments on Treasury’s opposition to brining criminal charges. Those comments were subject to what NPR labeled a “clarification” which meant they were removed from the program.
“Clarification: 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. We should have made it clear that it is the Justice Department, not the Treasury Department, that made the decision to defer prosecution of HSBC.”
This “clarification” had multiple (minor league) Orwellian elements. NPR did not clarify, it obfuscated and censored. The original story was accurate and far cleared. The “clarification creates a strawman argument that I never made in order to appear to refute my actual position. The “clarification” was crafted to mislead the listener. I also became anonymous in the clarification, so that listeners were unable to judge from my background and reputation that the “clarification” was bogus. By “deferred” prosecution DOJ means non-prosecution, so the clarification mislead the listeners on many dimensions.
Later, we learned from a New York Times article that Treasury Secretary Timothy Geithner’s press flacks had induced NPR to issue its obfuscating “clarification.” That article, however, never quoted what I had actually said and instead treated Treasury’s strawman construct as if it were I had said. The article was even stranger because it was written by Ben Protess. Protess had written prior articles indicating that Treasury opposed prosecutions for elite banks and bankers, which was actually what I told NPR. This makes Protess’ falling hook, line, sinker, rod, reel, and boat for Treasury’s strawman argument even lamer.
“When Treasury joined the Justice Department in announcing the case in December, a media outlet ran an overnight article in which a professor speculated that Mr. Geithner had not criminally prosecuted HSBC to avoid putting it out of business.
By dawn that day, Treasury officials e-mailed one another about the article. Shortly after, National Public Radio retracted the quote and issued a statement saying that Treasury had not been involved in the decision not to indict HSBC.”
I was that anonymous “professor.” The quoted passage is not even clever. I, unlike the Treasury flacks and the NPR and NYT reporters, am a former DOJ lawyers and financial regulator active in assisting the most successful prosecutorial effort against elite white-collar criminals in history. I spend days of my life every year explaining to reporters and the public the difference between administrative, civil, and criminal actions and who makes the decisions. I have never told anyone that Geithner makes the actual “decision” whether to prosecute. What I have said is that when Treasury tells DOJ that prosecuting a bank could lead to a global systemic crisis virtually no Attorney General will prosecute the bank and risk being known as the person who caused a global financial crisis. No one serious disagrees with my point. Indeed, earlier in his article Protess says that DOJ guidelines require it to consider the impact of the potential bank failure prior to prosecuting a bank. DOJ is going to rely on the Treasury and (sadly) the bank’s economists in making that decision. Protess agrees with my actual statements to NPR though he says the opposite because was conned into falling for the strawman claim invented by Geithner’s flacks.
Fortunately, William Dudley Just Spilled the Beans
William Dudley is the President of the NY Fed. He testified before a Senate subcommittee and finally admitted the truth that many of us have long been explaining. The NYT article, sadly, failed to even report Dudley’s admission. The Huffington Post made it their lead in an article aptly titled: “The Fed Just Acknowledged Its Too Big To Jail Policy.”
“‘We were not willing to find those firms guilty before, because we were worried that if we found them guilty, that could somehow potentially destabilize the financial system,’ Dudley said. ‘We’ve gotten past that and I think it’s really important that we got past that.’
Dudley’s admission was just one of several cringe-worthy exchanges during an hour-long appearance before a committee intent on holding him accountable for regulatory lapses.”
It is time for NPR to clarify its clarification and remove the censored version of my comments and the many disingenuous statements of its faux “clarification.” It is time for the NYT to correct its endorsement of Treasury’s silly strawman claims against me. They might even inform their readers which “professor” they were trying to diss. If the Obama administration can (a mere six years later) come clean about its repeal of the rule of law for elite banks and bankers NPR and the NYT should also embrace belated glasnost. Getting conned by Geithner’s press flacks requires the cleansing absolution that can only come from confession and contrition.