, Salem, MA

January 10, 2013

Column: Corporate cronyism, government capitulation

Joseph F. Doyle
The Salem News

---- — All through America, and for that matter, the Western World, there is the feeling that government, particularly the United States government, is just another organized crime group. There are some specific incidences that seem to glaringly verify that suspicion even more than others.

Take, for instance, the example of Jon Corzine, former CEO of the now-defunct MF Global. Corzine, also a former head of Goldman Sachs and former governor of (and senator from) New Jersey, testified that had no idea where $1.7 billion in MF Global depositors’ money had gone. He gave the classic Sgt. Schultz (“Hogan’s Heroes”) line, “I know nothing!” The collective agencies and investigators empowered to protect society stated, in harmony, on Aug. 16, “Your word is good enough for us, Jon.” They then dropped the whole investigation. Today, Jon Corzine heads up a whole new hedge fund!

If you think that’s bizarre, wait till you hear about HSBC Holdings. Since 2007, the Office of the Comptroller of the Treasury of the United States had noticed a massive suspicious cash flow emanating from HSBC’s Mexican branch and channeled into the U.S. and the 80 other HSBC branches around the world. The investigation disclosed that HSBC was handling cash transactions from rogue governments, known terrorist groups and drug cartels. Among the source locations around the world were Mexico, Iran, Sudan and Cuba, not to mention some known affiliates of al-Qaida.

On Dec. 11, 2012, with the full realization that HSBC had amassed $38 billion in profits over the last two years, U.S. Assistant Attorney General Lanny Breuer stated, “Our goal here is not to bring HSBC down. I wouldn’t say it’s too big to prosecute. I’m not going to say that. I don’t think that the bank thinks it got off easily.” HSBC was levied a $1.92 billion fine with deferred prosecution. Breuer said this would “send a pointed message to financial institutions that have been lax in weeding out bank activities for criminals and terrorists.”

Jack Blum, an international banking expert in Washington, D.C., said, “This is totally unacceptable. There has been too much criminal activity. These people managed to cross every line that was crossable. It was an astonishing amount of criminal behavior. I’d say this is a signal to other banks that if you do this kind of stuff, you get a parking ticket. You pay the fine and you move on — and that’s unacceptable.”

Actually, this is beyond unacceptable. There’s too much erudite, flowery language going on here. In regards to the $8 billion in cash directly tied to the drug cartels, this represents the facilitation of multiple thousand-pound lots of cocaine and multiple thousand-pound lots of heroin made available to the population of the United States, and into the bloodstreams of the children of America, not to mention the misery, heartache and destruction to American families. Additionally, there is the reality of the multiple billions of dollars in taxpayer underwriting for law enforcement and prisons, which perpetuates the situation.

To be fair, HSBC is not the only culprit in handling narcotics cash. There are other financial institutions handling $350 billion in cash generated by narcotics traffic annually. HSBC is just the flavor of the month.

To add insult to injury, HSBC is being allowed a tax write-off for the $1.92 billion “punishment.” It becomes obvious right about here that the real message from the government to all financial entities is, “We’re the big dog. You can go on doing this, but make sure we get our piece of the action.”

There are many, many more examples of egregious financial machinations, but space limitations leave me to choose only one. So I give you Jamie Diamond, CEO of JPMorgan Chase, who testified on July 13, 2012, before the Senate Finance Committee that Chase’s recent $2 billion loss figure was not reliable, and the whole issue was only a “tempest in the teapot.” (He made this assertion under oath.) He further asserted that there was no reason for concern.

It should be noted, at this point, that in the first six months of 2012, JPMorgan had contributed an aggregated total of $300,000 in campaign contributions to 14 of the 17 members of the Senate committee investigating JP Morgan Chase. Three weeks after Diamond’s testimony, the “tempest in the teapot” had boiled over with an additional $5 billion in losses, bringing the total loss to $7 billion.

Mr. Diamond was never called back to the committee. (I guess if you’re not Roger Clemens, you don’t get called back and prosecuted.)

To show the winner-take-all dynamic of crony capitalism at work, and that neither party is an advocate for the middle class, the true figure for the bailout was between $6 trillion and $7 trillion. In 2009, 93 percent of the GDP went to the top 1 percent. Of that, 37 percent went to the top 0.01 percent.

The “revolving door” in our government must be closed, permanently. Financial institutions that are “too big to fail” (or to prosecute) must be broken up. Campaign financial reform is a white-hot must. Most of all, punishment for malfeasance encompassing the government and financial sectors must be sure, swift and draconian.

The United States’ three-branch government is the best on the planet. Nevertheless, the malignant filth now clogging the works is in dire need of cleansing and maintenance.


Joseph F. Doyle is a freelance writer who lives in Salem.