Reading Taibbi as someone in finance is like watching Bravo's Silicon Valley for much of HN. It's hyperbolically relatable in a way that makes you laugh but simultaneously grimace-inducing as you realise how mis-informative it is to someone without prior knowledge.
Take HSBC. Yes, it is a cock up of grand proportions to allow Iranian money anywhere close to your American subsidiary. And yes, everyone involved in the Libor scandal should go to jail (as I expect many of them will).
Then one notices that this was largely trade financing for buyers in India, Greece, and South Korea. HSBC, like Standard Chartered, grew out of a tradition of giving a great deal of independence to country offices. Sort of like IBM. This increases flexibility but makes miscommunication more likely. Anti-money laundering is hard and margin compression at banks has thinned compliance teams. Financing terrorism suddenly becomes something more banal - a zealous banker shifting records around for a client he may have known from pre-revolutionary days (Iran was a U.S. ally until the 1979 revolution).
Does this excuse the behaviour? No. But it certainly dulls my pitchfork. Just as I avoid Fox News to stay abreast of American politics I would encourage you to seek out sources chasing understanding. Then again, a good outrage isn't a cheap good either :).
Well, the point I take away from Taibbi is that a big bank like HSBC can do things that are (a) criminal and (b) bad for us (US, developed world economy) and they won't be forced to change their ways, even after they are caught, repeatedly. I don't see anything in what you say that disagrees with that. What you say just amounts to "it is their business model." So they have a business model that encourages, or possibly requires, criminal behavior, and this appears to be effectively OK with regulators...
Regarding your point about "giving a great deal of independence to country offices." Why do these country offices need to belong to HSBC? Why do people bank with offices of HSBC rather than local banks? I'm fairly sure that these local offices provide essential connections to the larger financial network -- for example to move funds from African countries to the Gulf countries. But regulators do not, for example, require HSBC to divest itself of any of these country offices which abuse their independence -- which seems like a rather mild sanction under the circumstances, and likely to greatly mitigate the issues.
Thank God this is at the top of the page. I'm always shocked to see Taibbi get so much attention on HN. I would take his commentary about as seriously as I would any other polemicist of the Glenn Beck / Michael Moore variety.
Being a trader yourself, your sentiment is well seen and understood. I see how Taibbi's style can be of annoyance to you, but I think you're largely nitpicking. The essence of it stays valid and I yet to see an important executive going to jail, either in relation to 2008 or Libor.
It amazes and depresses me that it takes bad behavior on a level that is easily explainable (i.e. help terrorist launder money) for people to get upset at how untouchable large international financial institutions have become.
The LIBOR scandal is so much bigger and more important than this HSBC case but it seemingly gets a pass from public outrage since there's no easy TL;DR explanation of it.
The first few pages of the OP, which focus on HSBC, were actually nowhere near as important as the last page, on LIBOR. The LIBOR case is much, much more important than whether or not HSBC had dealings with Iran. When he's talking about this, Taibbi sounds weirdly parochial, like he's more upset about America's interests being ignored than he is about any fundamental wrongdoing (I know he's American and Rolling Stone has a predominantly US audience, but still...)
You're paying an interest rate on your car, your mortgage and your bank loan right? OK, that interest rate is set by the bank. The way they do that is to use LIBOR, and add a bit on top which is their profit. So your loans follow LIBOR. The banks basically rigged the game, and changed LIBOR as they saw fit, meaning that you paid more in interest than you should. Your neighbour did too. And his neighbour. If you add it all up it's billions.
They fucked everyone to make a quick buck, and it's illegal as hell.
Libor TLDR: "Organizations set their interest rates to a random number that some banks came up with. The banks changed how they came up with the number without telling anyone, and the organizations got mad because it caused them to lose money while the banks made money."
There are two responses to something like LIBOR. One response is Taibbi's, which is to ask for the US government to crack down on bankers. This fails because of the tacit assumption that the US government is any less corrupt.
The second response is to embrace something like Bitcoin, which decentralizes everything. No central banking, no LIBOR scandal. But also no ability to stop "money laundering", defined as a transaction that a government doesn't want you to engage in. That's the tradeoff: the Bitcoin protocol is based on an adversarial environment and gives no special privileges to government or banking nodes.
LIBOR (banks), QE4 (govt), and the bailouts (both) are all enabled by the fact that some nodes in our system are granted special powers to set rates and print money.
I think the thing is that it takes something truly shocking to penetrate the defensive layers of "but liberal capitalism can't do this" thinking.
Our financial sector is currently hopelessly corrupt and, at least in the US, the banking sector itself has a total grip on any attempt to regulate it.
This related hearing [1] led by freshman senator Elizabeth Warren is eye-opening. She can't get a straight answer on the last time a major bank was taken to trial over its offenses.
She does get a straight answer. Regulators don't sue; they have a steady-state relationship with the banks where their concerns are addressed with consent decrees. Lawsuits are insanely expensive in the best of cases, but they're worse when you're suing a megabank, because the suit impacts the broader economy.
It is a little disingenuous for Warren to act surprised about this. She knows not only why regulators don't sue, but also how unlikely it is that we're going to start doing that (it'd be economically irrational for us to do so).
Her heart is in the right place. Too Big To Fail is a real problem. But if you've got a bunch of wasp nests in your back yard, you don't fix the problem by jamming sharp sticks into them.
Can anyone here answer Warren's question, even if the regulators couldn't? I'd be interested to learn about any court trials prosecuting larger banks (that is, if any exist), but it's proving difficult to Google.
About 8 years ago an investor in my first company was defrauded by a con artist. This led me on a crazy 4 year chase which resulted in the discovery of a series of pump and dump stock frauds worth over $1 billion (think Enron, divided into smaller pieces) and possible ties to terrorism. This was a result of class action lawsuits, SEC investigations etc. None of which resulted in any type of jail time, and one of the individuals lives nicely in a 20 bedroom mansion in Barbados.
The sad part about all of this, was that I notified the SEC on multiple occasions with physical proof that people were defrauding the government and individuals. The SEC's responsibility wasn't "to handle foreign citizens." Homeland Security "didn't handle securities cases." The IRS needed the person's Social Security Number, name and address. When someone moves from one state to another, the states stop communicating on any type of prosecution.
The whole process was a fascinating/scary insight into how easy it is to commit fraud in the United States.
So as a word to the wise for first time entrepreneurs, don't be afraid to ask investors, VCs or others where their money comes from.
> "Had the U.S. authorities decided to press criminal charges," said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, "HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized."
Corporations don't commit crimes, people do. Executives employed by this company were responsible for all of the illegal activities that this story describes. They get paid a shitload of money because they take risks on behalf of the company and are supposed to be responsible for the results of those actions. When they perform well, they get a huge bonus. When they don't, their punishment is that they get "only" their salary and no bonus. Fine, whatever. But when they authorize actions that are clearly illegal, they should go to jail.
The attorney general should be finding the responsible executives and prosecuting them. If the company doesn't cooperate, then throw the board in jail. The company can then hire/elect replacements who will be properly scared shitless of doing anything illegal. These guys are supposed to be compensated for the risks that they take. You can't have a multi-million dollar (personal) upside and no comparable downside. In a just society, the downside needs to be that if you're caught breaking the law, you go straight the fuck to jail like everybody else.
If you don't make people personally responsible for their actions, you're effectively giving them a blank check to do whatever the hell they want and then hide behind an operation that won't be touched because it's too big to fail. You also have employment contracts that require the corporation to pay legal fees and use their enormous resources to protect them from personal liability.
Obviously there are situations when a company needs to defend its executives in order to conduct normal operations, but the line in the sand needs to be drawn at accusations of criminal behavior.
There are some very obvious issues here, like the deliberately un-investigated SARs; but I'm inclined to side with HSBC in some places here. Where transactions with and accounts held by persons or countries against whom the US has sanctions in place are concerned, I think HSBC was entirely correct in saying "these accounts aren't in the US, so we're not going to report them to the US government". The US government has the power to regulate banking in the US... not throughout the entire world.
If you want to commit a white collar crime make sure that it involves stealing or laundering billions of dollars through the banking system rather than downloading journal articles that are ostensibly in the public domain.
We should stop talking about this immediately and focus on the real issues like arresting Julian Assange for aiding the enemy, several of the things he leaked could potentially be used by the enemy in some way, somehow.
It's been going on for years. Take the taxpayer bailed-out Citibank for example:
1999 "...clients, from Mexico, Nigeria, Pakistan and Gabon, whose sources of income were dubious and who passed millions through Citigroup banks." http://news.bbc.co.uk/2/hi/americas/511951.stm
2009 "Japan raps Citi for lax money laundering controls... bans Citi from retail banking promotions for a month... cites problems with governance, internal controls... Regulatory action follows similar violation in 2004" http://www.reuters.com/article/2009/06/26/citigroup-japan-id...
2012 "A US bank regulator cited Citigroup on Thursday for failing to comply with a federal law that requires banks to establish protections against money-laundering but did not impose a fine." http://www.nypost.com/p/news/business/us_regulator_cites_cit...
Matt Taibbi? I agree with his general point of view, but it is amazing that people still consider him a journalist. It appears he has mastered the art of making smears look like journalism.
I'm not familiar with Taibbi's work but what exactly is wrong with this article? His facts are easily verifiable. Sure its polemical but that doesnt exclude it from being journalism.
Indeed it seems he's had some commendations for his financial writing regarding the crap we've seen from banks in the last few years:
I think it is the opposite, he makes journalism look like smears. I pretty much agree with him 100% on the issues but 0% on the presentation -- I can't stand to read his articles because they drip with vitriol. Over the years I've grown used to seeing that style associated with attempts to deliberately misinform and pander to the worst elements of the population's character. So when I see him do it, it compels me to distrust his reporting.
>"Had the U.S. authorities decided to press criminal charges," said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, "HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized."
Why governments can not confiscate or nationalise HSBC and continue legal operations?
That sort of thing leads to investor panics and possibly social instability. Go to the Wall Street Journal website and read the comments on any political story. there's a large number of people who are convinced that Obama is a full-blown Communist and just waiting for his chance to go down the same path as Mao Tse Tung, Fidel Castro, Hugo Chavez etc.
That's why it's safer o work through legislative means. People have wildly distorted ideas about the executive branch.
EDIT: see, for example, one of the sibling comments here.
It's a huge, largely foreign-owned and run multinational company that looks after billions of dollars of largely innocent people's financial assets. I think it's fair to say the US government attempting to seize control of a large part of the operation might have a few negative side effects.
The US has imposed trade sanctions and even been implicated in coups against foreign regimes responsible for relatively minor nationalizations.
The regulatory capture of pretty much every national government by the global financial superorganism[1] is an existential threat to humanity in ways that we are barely equipped to comprehend.
Some of the more pure examples of this evil ( from the human standpoint ) are what happens in Amazons warehouse facilities [2]. But the more mundane examples show up with your monthly bills.
It seems not long from now that corporations wanting to redevelop a desirable plot of land will be able to buy a permit to exterminate the humans living on it. And while today that notion sounds faintly ridiculous, it's not unheard of; we are all american indians now.
That's simple-sounding, but I don't think it's simple.
Large organizations like banks are fantastic for obscuring responsibility. The CEOs say, "I didn't know." The line workers say, "I was just following orders."
Everybody in between keeps things hazy because it's useful to their careers. When things go badly, they need to be able to claim it wasn't their fault. When things go well, they try to claim credit.
The net result is nobody gets punished when there is crime on a massive scale.
I think the only viable option is to punish the company. I think it would also be fair to change the law such that CEOs are treated as negligent if they let internal controls get to the point where criminal things are happening without an obvious, chargeable conspiracy by a group of workers. But good luck getting our bought-and-paid-for congressmen to approve something like that.
It's pretty disgusting that we're throwing principles away for the sake of expediency. How long before there are no principles left? What does that kind of country look like?
Personally I'd like to see a country where the rule of law is still respected. Forget expediency. I'll take some pain every once in a while to avoid this kind of outrage.
I'm amazed at all the attacks on Matt Taibbi and Elizabeth Warren in this thread. They are standing up for what they believe is right in their own unique way. They have worked hard to get to where they are. Give them some respect.
At this point I have to believe that a Justice Department that will push a guy to suicide for taking files is plainly in partnership with corrupt banks. The Justice Department is merely the legal firm for the banks.
I've started a WhiteHouse.gov petition - Send the Execs to Jail, but Keep the bank running by hiring replacements. Show that people who do this are held accountable, even if the business is too big to fail.
http://wh.gov/dtmj
Excellent idea - have government-selected people with no experience with the company run the company, with a promise that if anything happens in the huge company they are managing, they go to jail. Oh yes, and to make things easier send all the people who know what happens in the company to jail so they aren't accessible and have zero motivation to help. Now you only have to properly cap the pay for new management - to ensure you pay them less than a comparable job elsewhere - and you have a winning recipe. I can't imagine how this could go wrong.
[+] [-] JumpCrisscross|13 years ago|reply
Take HSBC. Yes, it is a cock up of grand proportions to allow Iranian money anywhere close to your American subsidiary. And yes, everyone involved in the Libor scandal should go to jail (as I expect many of them will).
Then one notices that this was largely trade financing for buyers in India, Greece, and South Korea. HSBC, like Standard Chartered, grew out of a tradition of giving a great deal of independence to country offices. Sort of like IBM. This increases flexibility but makes miscommunication more likely. Anti-money laundering is hard and margin compression at banks has thinned compliance teams. Financing terrorism suddenly becomes something more banal - a zealous banker shifting records around for a client he may have known from pre-revolutionary days (Iran was a U.S. ally until the 1979 revolution).
Does this excuse the behaviour? No. But it certainly dulls my pitchfork. Just as I avoid Fox News to stay abreast of American politics I would encourage you to seek out sources chasing understanding. Then again, a good outrage isn't a cheap good either :).
[+] [-] jedharris|13 years ago|reply
Regarding your point about "giving a great deal of independence to country offices." Why do these country offices need to belong to HSBC? Why do people bank with offices of HSBC rather than local banks? I'm fairly sure that these local offices provide essential connections to the larger financial network -- for example to move funds from African countries to the Gulf countries. But regulators do not, for example, require HSBC to divest itself of any of these country offices which abuse their independence -- which seems like a rather mild sanction under the circumstances, and likely to greatly mitigate the issues.
[+] [-] rpm4321|13 years ago|reply
[+] [-] znowi|13 years ago|reply
[+] [-] unknown|13 years ago|reply
[deleted]
[+] [-] lawrence|13 years ago|reply
[+] [-] mcphilip|13 years ago|reply
The LIBOR scandal is so much bigger and more important than this HSBC case but it seemingly gets a pass from public outrage since there's no easy TL;DR explanation of it.
[+] [-] rjknight|13 years ago|reply
[+] [-] mixmax|13 years ago|reply
You're paying an interest rate on your car, your mortgage and your bank loan right? OK, that interest rate is set by the bank. The way they do that is to use LIBOR, and add a bit on top which is their profit. So your loans follow LIBOR. The banks basically rigged the game, and changed LIBOR as they saw fit, meaning that you paid more in interest than you should. Your neighbour did too. And his neighbour. If you add it all up it's billions.
They fucked everyone to make a quick buck, and it's illegal as hell.
[+] [-] jrockway|13 years ago|reply
[+] [-] tedunangst|13 years ago|reply
[+] [-] temphn|13 years ago|reply
The second response is to embrace something like Bitcoin, which decentralizes everything. No central banking, no LIBOR scandal. But also no ability to stop "money laundering", defined as a transaction that a government doesn't want you to engage in. That's the tradeoff: the Bitcoin protocol is based on an adversarial environment and gives no special privileges to government or banking nodes.
LIBOR (banks), QE4 (govt), and the bailouts (both) are all enabled by the fact that some nodes in our system are granted special powers to set rates and print money.
[+] [-] einhverfr|13 years ago|reply
Our financial sector is currently hopelessly corrupt and, at least in the US, the banking sector itself has a total grip on any attempt to regulate it.
[+] [-] callmevlad|13 years ago|reply
[1] http://www.dailykos.com/story/2013/02/15/1187417/-Elizabeth-...
[+] [-] tptacek|13 years ago|reply
It is a little disingenuous for Warren to act surprised about this. She knows not only why regulators don't sue, but also how unlikely it is that we're going to start doing that (it'd be economically irrational for us to do so).
Her heart is in the right place. Too Big To Fail is a real problem. But if you've got a bunch of wasp nests in your back yard, you don't fix the problem by jamming sharp sticks into them.
[+] [-] meomix|13 years ago|reply
[+] [-] peterjmag|13 years ago|reply
[+] [-] hugi|13 years ago|reply
[+] [-] bsims|13 years ago|reply
The sad part about all of this, was that I notified the SEC on multiple occasions with physical proof that people were defrauding the government and individuals. The SEC's responsibility wasn't "to handle foreign citizens." Homeland Security "didn't handle securities cases." The IRS needed the person's Social Security Number, name and address. When someone moves from one state to another, the states stop communicating on any type of prosecution.
The whole process was a fascinating/scary insight into how easy it is to commit fraud in the United States.
So as a word to the wise for first time entrepreneurs, don't be afraid to ask investors, VCs or others where their money comes from.
[+] [-] ohazi|13 years ago|reply
Corporations don't commit crimes, people do. Executives employed by this company were responsible for all of the illegal activities that this story describes. They get paid a shitload of money because they take risks on behalf of the company and are supposed to be responsible for the results of those actions. When they perform well, they get a huge bonus. When they don't, their punishment is that they get "only" their salary and no bonus. Fine, whatever. But when they authorize actions that are clearly illegal, they should go to jail.
The attorney general should be finding the responsible executives and prosecuting them. If the company doesn't cooperate, then throw the board in jail. The company can then hire/elect replacements who will be properly scared shitless of doing anything illegal. These guys are supposed to be compensated for the risks that they take. You can't have a multi-million dollar (personal) upside and no comparable downside. In a just society, the downside needs to be that if you're caught breaking the law, you go straight the fuck to jail like everybody else.
If you don't make people personally responsible for their actions, you're effectively giving them a blank check to do whatever the hell they want and then hide behind an operation that won't be touched because it's too big to fail. You also have employment contracts that require the corporation to pay legal fees and use their enormous resources to protect them from personal liability.
Obviously there are situations when a company needs to defend its executives in order to conduct normal operations, but the line in the sand needs to be drawn at accusations of criminal behavior.
[+] [-] camus|13 years ago|reply
but but corporations are people ?!? they said
[+] [-] cperciva|13 years ago|reply
[+] [-] pyre|13 years ago|reply
[+] [-] InclinedPlane|13 years ago|reply
[+] [-] clicks|13 years ago|reply
I remembering reading about this way early on... and cast it aside as some false hyped up story.
Then I saw it being reported by high profile journals...
The biggest banks in the world are aiding terrorists and drug dealers do their work in the most crucial way: handling the financial end of things.
Isn't that just absolutely absurd? I don't know what to think at this point.
[+] [-] Drakim|13 years ago|reply
[+] [-] bitcartel|13 years ago|reply
1999 "...clients, from Mexico, Nigeria, Pakistan and Gabon, whose sources of income were dubious and who passed millions through Citigroup banks." http://news.bbc.co.uk/2/hi/americas/511951.stm
2009 "Japan raps Citi for lax money laundering controls... bans Citi from retail banking promotions for a month... cites problems with governance, internal controls... Regulatory action follows similar violation in 2004" http://www.reuters.com/article/2009/06/26/citigroup-japan-id...
2012 "A US bank regulator cited Citigroup on Thursday for failing to comply with a federal law that requires banks to establish protections against money-laundering but did not impose a fine." http://www.nypost.com/p/news/business/us_regulator_cites_cit...
[+] [-] SilasX|13 years ago|reply
[+] [-] saosebastiao|13 years ago|reply
[+] [-] AlexDanger|13 years ago|reply
Indeed it seems he's had some commendations for his financial writing regarding the crap we've seen from banks in the last few years:
http://en.wikipedia.org/wiki/Matt_Taibbi#Financial_journalis...
Is there evidence he's been loose with facts in the past or do you take issue with his writing style?
[+] [-] nhebb|13 years ago|reply
[+] [-] Amadou|13 years ago|reply
[+] [-] anonymfus|13 years ago|reply
Why governments can not confiscate or nationalise HSBC and continue legal operations?
[+] [-] anigbrowl|13 years ago|reply
That's why it's safer o work through legislative means. People have wildly distorted ideas about the executive branch.
EDIT: see, for example, one of the sibling comments here.
[+] [-] notahacker|13 years ago|reply
The US has imposed trade sanctions and even been implicated in coups against foreign regimes responsible for relatively minor nationalizations.
[+] [-] dabeeeenster|13 years ago|reply
[+] [-] Evbn|13 years ago|reply
[+] [-] monochromatic|13 years ago|reply
[+] [-] olefoo|13 years ago|reply
Some of the more pure examples of this evil ( from the human standpoint ) are what happens in Amazons warehouse facilities [2]. But the more mundane examples show up with your monthly bills.
It seems not long from now that corporations wanting to redevelop a desirable plot of land will be able to buy a permit to exterminate the humans living on it. And while today that notion sounds faintly ridiculous, it's not unheard of; we are all american indians now.
1. http://www.kk.org/thetechnium/archives/2008/10/evidence_of_a...
2. http://j.mp/XgOnkf
[+] [-] guard-of-terra|13 years ago|reply
Don't revoke license, so the world does not collapse, instead make decision makers lose sleep.
[+] [-] wpietri|13 years ago|reply
Large organizations like banks are fantastic for obscuring responsibility. The CEOs say, "I didn't know." The line workers say, "I was just following orders."
Everybody in between keeps things hazy because it's useful to their careers. When things go badly, they need to be able to claim it wasn't their fault. When things go well, they try to claim credit.
The net result is nobody gets punished when there is crime on a massive scale.
I think the only viable option is to punish the company. I think it would also be fair to change the law such that CEOs are treated as negligent if they let internal controls get to the point where criminal things are happening without an obvious, chargeable conspiracy by a group of workers. But good luck getting our bought-and-paid-for congressmen to approve something like that.
[+] [-] conroe64|13 years ago|reply
[+] [-] msandford|13 years ago|reply
Personally I'd like to see a country where the rule of law is still respected. Forget expediency. I'll take some pain every once in a while to avoid this kind of outrage.
[+] [-] don_draper|13 years ago|reply
[+] [-] nonamegiven|13 years ago|reply
[+] [-] tsotha|13 years ago|reply
Oh wait. No I'm not.
[+] [-] bsims|13 years ago|reply
http://news.ycombinator.com/item?id=5236372
[+] [-] patrick_curl|13 years ago|reply
[+] [-] smsm42|13 years ago|reply