Too Big to Jail?

It has been a while since I wrote a new post regarding fines and lawsuits brought up on banks in my Revenge on the Street segment. Feel free to  It seemed as if the US Department of Justice had taken a break in its mission to bring justice upon those whose crimes and wrongdoings led to the financial collapse of 2008 and other ensuing scandals such as JP Morgan’s entanglement in Bernie Madoff’s ponzi scheme and the LIBOR rigging affair.

Progressives and liberals claim that the US Department of Justice have actually been letting banks who’ve broken the law get away with their crimes by paying a fine which is usually a meager amount when compared to the profits banks make and the bonuses top bankers earn. They demand that banks and bankers who committed crimes should go to jail like the rest of us would if we stole a car or assaulted a police officer. The reason that banks are not prosecuted and are backed by the government is because of a concept called ‘too big to fail’, or in legal cases ‘too big to jail’. The idea behind this term is that international banks have become so large and so integrated into our economic systems that the government will bail it out if it goes bankrupt (fail) and will prevent any prosecutions that would shut it down or severely effect its structure (jail.)

However, just last week, US Attorney General Eric Holder released a video stating that “there is no such thing as too big to jail” and that “no individual or company, no matter how large or how profitable, is above the law”. Check out the rest of Eric Holder’s statement in the following clip.

Great news right! With the full support of the US Attorney General, justice will finally be served and banks will be appropriately punished for the crimes they committed. In fact it is believed that Holder made this statement in reference to BNP Paribas and Credit Suisse, which should expect legal cases brought upon them soon. BNP Paribas is alleged to have done business with blacklisted countries such as Iran whereas Credit Suisse is believed to have provided illegal tax shelters. and Citigroup is suspected to have provided.

I’d hate to be a pessimist but its wise to not put too much trust in Eric Holder’s words. I’m a man of reason. I base my judgement on facts and historical trends and in this case, history shows that we’re bound to see the same weak treatment of criminal actions as before. A prosecution will be started and will end in a settlement worth a few billion dollars which may sound like a lot until you take a look at the profits these banks make. If you don’t believe me, take a look at this table on the Economist’s website of recent settlements.


In none of these cases did a single banker go to jail. That why I think this meme sums up the situation displayed in the table pretty accurately.

too big to jail

Just to be clear, I’m not a progressive or a socialist. I don’t like to attach myself to any form of ideology and I have nothing against the banking sector. In fact, I work in the finance sector. But I do have a problem with the double standard applied when it comes to justice in this world. No one can deny that those who are wealthy and in positions of power get more lenient repercussions for their crimes than regular citizens. Whereas politicians and bankers get away for their multi-million crimes by paying bail or through community service (take a look at Silvio Berlusconi’s punishment for tax evasion), regular folks like you and me would get many years in prison for much smaller misdemeanors. From the table above, I think HSBC’s settlement best explains the injustice that I’m attempting to point out. In December of 2012, HSBC was discovered to have provided money laundering services to various Mexican drug cartels and had also facilitated transactions with rogue nations such as Iran, Libya, Sudan and Myanmar, which is in violation of the sanctions placed by the US Treasury. These may have just been financial transactions, but in effect, HSBC indirectly aided the massacre in Darfur by the Sudanian government and the deaths caused by drug cartels in Mexico. To put some numbers to those cases, roughly 120,000 people have died due to gang related violence across Mexico and somewhere between 170,000 to 450,000 have lost their lives during the conflict in Darfur. Thus, HSBC aided people who have blood on their hands. Usually, the mainstream media does a poor job of covering these issues. However, here is a great ABC News video regarding HSBC’s money laundering scandal.

The Department of Justice did not pursue criminal charges and settled for a $1.9 payment from HSBC. Like I stated before, that might sound like a hefty amount, but in 2012 HSBC generated a profit of $13.5 billion. In my opinion, that makes the $1.9 billion fine sound like a gentle slap on the wrist. News articles state that the money laundering occurred due to cost cutting in the bank’s compliance department. This makes it sound as if no one at the bank had any idea that these transactions were going on. Someone somewhere had to have known and that person should be in jail right now. When asked in a judiciary committee in 2013 by US Senator Chuck Grassley on why the Department of Justice did not indict HSBC, it was Attorney General Eric Holder himself who said the following words:

“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 you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy”

From the mouth of the hero himself, there is the unfortunate nail on the coffin. No matter how tough Attorney General Eric Holder may talk, past cases prove that at the end of the day, the wealth that banks posses and the influence they have over our politicians will lead to injustice. To be fair, I have read news articles stating that the Department of Justice may start banning banks charged with future criminal actions from using US dollars in transactions. This could deal a serious blow to banks that are charged with criminal cases in the future. However, if you consider the fact that I could go to jail for shoplifting or that a junkie on the street can be sentenced to prison for many years for selling drugs to homeless people, we can definitely say that banks will still get away with it.


So how can we solve the problem of too big to fail/jail? Its a daunting task that is often debated by economists and politicians around the world. I think this post has served its purpose of being a good introduction to this topic and I don’t want to keep rambling on. So I’ll leave that discussion to a future post.

“Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators.”
David Bagley, HSBC’s Head of Compliance


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