Loretta Lynch fumbled on HSBC years ago. Now she can prove no bank is too big to jail | Bartlett Naylor
Lynch’s investigation did result in a
December 2012 deferred prosecution agreement, which is a half-measure in criminal cases, somewhere between a conviction and exoneration. In this agreement, HSBC admitted to massive money laundering violations for narco-traffickers, terrorists and tyrants.
This involved more than $200tn in wire transfers. But Lynch did not bring criminal charges against HSBC or any HSBC executives for this admitted money laundering.
Instead, the deal required that the bank pay $1.9bn, about five weeks profit in fines – money that was effectively paid by shareholders. The settlement also required
HSBC to appoint a compliance monitor and institute reforms to prevent future wrongdoing. Lynch did not explain how they came up with $1.9bn. Was this more than the bank profited from money laundering? Was there some formula?
The settlement itself, and various Obama officials who chanced to appear before congressional panels at unlucky times, drew fire from understandably infuriated lawmakers. For example, Sen Elizabeth Warren challenged federal regulators including David Cohen, the undersecretary for terrorism and financial intelligence at the Department of the Treasury, in a
Senate hearing in March 2013 about the calculation. She
demanded to know how much money a firm needed to launder for the government to shut it down. Cohen
declined to respond to such “hypotheticals”.
On 6 March 2013, the outgoing Attorney General Eric Holder
told the Senate Judiciary Committee that some firms are so large that a criminal case would lead to financial calamity.
I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute – if we do bring a criminal charge – it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.
He has since
walked these comments back.