As I reported earlier many shareholders were disappointed that HSBC decide to remain HQed in the UK, and not retuen to HK.
Then it emerged that in 2012 Mr Osborne, the then UK Chancellorm interceded in the US Justice Department’s investigation into HSBC over money laundered through its American branches by Mexican drug lords. The DoJ was considering bringing charges on top of the fines it imposed on the bank, Britain’s biggest, but Mr Osborne argued that this would destabilise a “systemically important financial institution” and lead to “contagion”.
Now NYT Dealbook tells us more about how this intervention affected the DoJ’s decision to go easy on the maeco-bank
A BANK TOO BIG TO JAIL If you’ve ever wondered why the 2008 financial crisis generated almost no criminal prosecutions of large banks and their top executives, you should read the congressional report, “Too Big to Jail,” Gretchen Morgenson writes in Fair Game.
The report examines the Justice Department’s settlement with HSBC in 2012 after accusations that it laundered nearly $900 million for drug traffickers and processed transactions on behalf of countries subject to United States sanctions. It shows how regulators and prosecutors turned a potential criminal prosecution of HSBC into a watered-down settlement that insulated its executives and failed to take into account the full scope of the bank’s violations.
The bank and its American Subsidiary, HSBC Bank USA, agreed to pay almost $2 billion under the settlement, striking a deferred prosecution arrangement that remains in place. Under such deals, the government agrees to delay or forgo prosecution of a company if it promises to change its behavior.
The report concluded that the Justice Department’s leadership overruled an internal recommendation to prosecute HSBC, citing concerns “that prosecuting the bank ‘could result in a global financial disaster.'”
Peter Carr, a spokesman for the Justice Department, said it was “committed to aggressively investigating allegations of wrongdoing at financial institutions, and, along with our law enforcement partners, holding individuals and corporations responsible for their conduct.”
The facts outlined by prosecutors were damning enough to raise questions about why the bank had not been subject to harsher treatment and fueled the view that large financial institutions are not only too big to fail, but also too significant to be prosecuted criminally.
“The fact that so many of these cases are settled rather than going to court means we don’t get an airing of facts and challenges of facts,” said Edward J. Kane, a professor of finance at Boston College and an authority on regulatory failures. The report should be viewed as “evidence of an abuse of the regulatory system,” he added. “And unless proven otherwise, this is just the tip of the iceberg.”