The Justice Department and the U.S. Treasury are still walking on eggshells about the affability of “too big to fail.” Despite there being no studies focusing on how breaking apart big banks would affect the economy, both entities put a great deal of speculative weight on the “too big to fail” theory.
During a hearing back in March, Sen. Elizabeth Warren (D-Mass.) made Treasury Under Secretary for Terrorism and Financial Intelligence David S. Cohen answerable. Warren cited the admission of U.K. big bank HSBC to laundering nearly $1 billion for Mexican and Colombian drug cartels and violating U.S. international sanctions. She then asked Cohen “how many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before you consider shutting down a financial institution like this?”
Cohen claimed that he and the Treasury had not the authority, nor the expertise to make such a call. It’s odd that Cohen would make such a claim seeing how he practiced white collar criminal defense law for nine years, yet, he dodged answering Warren when she asked “have you no opinion?”
During that hearing, Treasury representatives Cohen and Jerome Powell, governor of the Federal Reserve, engaged in an awkward waltz around Warren’s candid questions. Throughout which, Cohen put the knowledge and authority of bank investigations and prosecutions solely on the Justice Department.
Mythili Raman, acting assistant attorney general of the DOJ’s criminal division said Wednesday on Capitol Hill that “size does not equal immunity.” Just having the DOJ finally come forth and take any stance is relieving, considering that U.S. Attorney General Eric Holder has been waffling on the issue. Holder, in January, stated that he was “concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute . . . it will have a negative impact on the national economy.”
He made a statement earlier this month which completely back peddled his January statement: “there’s no institution, there’s no individual who cannot be investigated and prosecuted by the United States Department of Justice.” But what about in the case of HSBC? They laundered money and violated international sanctions repeatedly but were only fined, a slap on the wrist compared to what the bank should have gotten.
But that’s the whole catch. There are many, like Sen. Warren, who believe that the bank should have received harsher treatment, but investigators, prosecutors, and the money goons at the Treasury are to afraid to do anything more than fines. They both keep falling back on the flimsy claim that any punishment past a fine will damage the economy. If not the institution itself, at least hold those in charge of the institution and drug money accounts responsible.
Joshua de Leon is a writer and researcher with Ring of Fire.