HSBC Archives - Frugaling

Flickr Photo Alcatraz Island Prison — Photo: Alcatraz | Credit: Jonas Bengtsson

Drug trafficking involves “cultivation, manufacture, distribution and sale” of illicit substances. Money laundering practices are utilized to fund terrorist regimes, evade taxes, and circumvent regulatory bodies. Nuclear proliferation occurs when fissionable materials, weapons, and/or knowledge is transferred to another country. If I committed any of these atrocities, I’d be jailed for life, killed, or on death row. If I assisted these assaults on democracy as a banker, I’d be enjoying a little vacation and bonus check.

In 2007-08, we entered a massive recession and crisis due in part to mortgage manipulation and banking maleficence. Last year, JPMorgan settled with the federal government for $13 billion. Attorney General Eric Holder suggested that their investigation showed that the company’s “conduct” was largely responsible for the mortgage crisis.

A few years ago, LIBOR was heavily manipulated. It’s a $360 trillion market responsible for setting borrowing rates around the globe. In 2012, Barclays Bank paid the U.S. $453 million to settle over severe market manipulation. The government found that the bank “manipulated key interest rates.” Later that year, UBS was fined $1.5 billion for similar charges over LIBOR.

In July 2013, JPMorgan paid $410 million for manipulating energy prices through the Midwest and California. JPMorgan didn’t even need to admit guilt in this claim:

“The bank neither admitted nor denied the violations, but said it would work with outside counsel to review its policies and practices in the power business.”

The Sinaloa Cartel, considered the most powerful drug trafficking cartel in the world, is known for brutal beheadings and murders. For years, they banked through their friendly HSBC branch — transferring hundreds of millions in blood money. For these classic money laundering practices, HSBC was forced to pay up:

“The Department of Justice levied penalties and forfeitures of $1.9 billion on the bank. Of course, with $2.6 trillion in assets, for HSBC this represented a man with a hundred dollars in his pocket paying a fine of seven cents.”

In May 2014, Credit Suisse, was fined $2.6 billion dollars for their involvement in helping Americans evade taxes.

“Credit Suisse bankers aided thousands of wealthy Americans in concealing their money from U.S. authorities, the Department of Justice said. The bank helped American clients set up shell accounts to shuttle their money overseas and then solicited false IRS documents to make the accounts seem legitimate.”

In regards to these fines and penalties, Attorney General Eric Holder was quoted saying, “This …shows that no financial institution, no matter its size or global reach, is above the law.” Even though Holder suggests that financial institutions aren’t above the law, these penalties rarely phase the companies and personally responsible parties walk freely. It’s setting a frightening example.

On June 30, 2014, BNP Paribas, a French bank, was fined $8.9 billion. The case asserted that BNP helped blacklisted countries like Iran and Sudan bring money to the States. As the New York Times reports, “not one BNP employee was criminally charged.” The company said this would not hurt their core businesses and they had enough to pay the fine. Effectively, a profit speedbump — merely a cost of doing illicit business. Their stock was up after the verdict.

We are failing to properly police some of the worst among us. Most bankers and executives that are closely linked and responsible for these laundering and racketeering charges won’t see the inside of a prison cell. They should. Bankers shouldn’t get a pass when they are guilty of laundering money for blacklisted governments and cartels.

The government is modeling a dangerous example for future bankers and companies. If you’d like to commit wire fraud, launder money, and make millions of untouchable, evaded dollars, enter the financial industry. Instead of jailing these atrocious members of society, the U.S. government is the mafia boss looking for their cut. If you have enough money to pay up, you won’t go to prison. Once the federal government gets their blood money, the banking game of roulette continues.

Bubbles burst: The rising action

On October 19, 1987, Wall Street crashed in one of the worst days ever. The financial world called this horrific day, “Black Monday.” The market was up 44% in the seven months prior to the implosion, and a solid bubble had formed. Various events simultaneously led up to that date, and the market crashed. We were supposed to learn from our mistakes, but we never do.

Just two months after the crash, the film Wall Street debuted. The fanfare was incredible. Here was a market that was reeling from excess, greed, and smarmy bankers. Now, a movie capitalized on America’s dislike for financiers. The tragic irony is that instead of crushing and discouraging careers on Wall Street, it has only seemed to encourage what it vilified.

Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A. —Gordon Gekko

Banks hardly struggled hiring scientists, engineers, and other people that make millions to trade in derivatives, bundle credit default swaps, and apply their mathematical talent to make even more money. Instead of manufacturing and creating, they’re pushing money.

In the above clip from Boiler Room, a young Vin Diesel can be seen reciting an essential part of the movie Wall Street. The fellow traders look on; all knowing the lines, as well. While Boiler Room may simply be a fictionalized tale of pump-and-dump schemes, it appears to highlight a truth: when traders heard Gordon Gekko say “greed is good,” they believed it.

See, in our current paradigm, it doesn’t matter what you say. As an analyst, banker, trader, etc., you can spout off what you want and never suffer retribution or consequences. In fact, you’ll usually be given a bonus, more time on tv, and an opportunity to be touted as a Wall Street success story.

Needing, wanting, desperate for money: The conflict

I’ve talked to a few friends that entered banking and financial positions. The heart of Oliver Stone’s Wall Street is missed by many of them. What’s comprehended is a surface level understanding of the antagonist — pre-jail sentence. It all adds up to a simple conclusion: Make your money, stay out of jail, and the hell with consequences.

Today’s movies are an extension of the same horrific story. Usually, some sort of humble but nascently narcissistic young man gets exposed to the world of money. They want a better life — sometimes for their families and sometimes solely for themselves. By becoming a trader, pumper-and-dumper, or insider, the riches seem easy.

Warning shots are fired. Loved ones beg Jordan Belfort and Seth Davis — repeatedly — to stop engaging in questionable practices. They urge them to change their ways before it’s too late and the FBI comes knocking. Even after that, some of them can’t stop their errant ways. The money is too great to stop.

Get your bonuses, cars, and women: The climax

In the Wolf of Wall Street, Jordan Belfort cheats on one woman after another, lies to each, and gets away with everything. Nearly every movie about Wall Street portrays bankers in this way. They seem to be saying, “The hell with authority. I don’t need to worry.”

This is the good life. They are fighting for it, with every last breath. In the movies, you know that the authorities are on their tail. You can see that all is not well. You’re omniscient to the steep, precipitous decline that’s in order. In real life, the good life will likely be maintained.

Everything is collapsing: The (false) falling action

Here’s where I wish that these fictionalized accounts were based on real life. It doesn’t take long to realize that bankers and traders are regularly engaging in questionable business practices. Their monies are too great — even for the authorities (i.e., too big to fail). By standing behind corporations, it’s rare if anyone takes the downfall. The corporation bears the responsibility. Just look at the recent HSBC money laundering for drug cartels and terrorist groups.

At least in the movies someone gets put in jail nearly every time. Nowadays, that’s a rarity. In fact, most bankers don’t even need to admit wrongdoing through a “guilty” verdict. No, all they need to do is pay a government agency a paltry sum that barely equates to a couple week’s revenue. The punishment is a slap on the wrist and the individual profits are retained — the bonuses and salaries are kept.

FBI and governmental hearings are a joke in many instances. Senators take bankers “to task” and “grill” executives with “tough” questions, which are then placed on YouTube with those key phrases. Usually, the words are used by a Congressperson’s own staffers. They become packaged up junk that can be brought back to angry constituents. They seem to be saying, “Don’t worry, your Congressperson is doing something, look at this video!”

Yelling, calling, and shouting at bankers isn’t what this market needs. We deserve better than that. The market needs better than that.

Nothing is worse than watching the scenes after each other. For example, check out the following scene from the Wolf of Wall Street. Here, you’ll see Jordan Belfort and his cronies deny all wrongdoing and recollection of maleficence. Compare that to the previous, real life instance with Goldman Sachs.

Nothing gets done, learned: The (false) resolution

It gets old, but every time a bubble bursts, bankers commit a crime, and/or the average American suffers, the White House and Congress get vocal and appear furious. The previous section shows their powerful vitriol.

After the verbal aggression ends, and the stories calm down, everyone stops talking about issues in the financial markets. Instead, we’re back to exclaiming how wonderful it is that the market is at all-time highs — doomed to repeat our mistakes. Will we ever learn?

While Obama and Congress will speak up immediately following every criminal activity or crash, by not receiving harsher punishments, bankers can gamble on. American may not condone the action of HSBC executives for laundering money for cartels, and slap them with $800 million in fines, but the executives walk free. We’ve created a unpunishable playground for adult children — only seeking their own selfish desires for more and more wealth.

We move on from bank to bank, bubble to bubble, and history just seems to repeat itself. We don’t seem to learn from our financial mistakes. We don’t truly censure, reprimand, and jail those who commit financial atrocities (on television or in boardroom meetings), either. We’ve created a perfect poison for market movers to manipulate our wallets in the grandest stadiums of all time.

How many times will the average American suffer from this repeated bubble and burst cycle, market manipulation, and financial greed? When will we act to prevent these actions from ever happening again?