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Timothy Geithner Says Justice Is Nice but Banks Are Just the Best

10:34 am in Financial Crisis by masaccio

The Secretary of the Treasury discusses the rule of law

The soon-to-depart Treasury Secretary Timothy Geithner confirmed to Liaquat Ahamed of The National Review that his goal was to protect bankers:

… My own view was that it was going to be very hard, if not impossible to design a financial rescue that was going to be effective in protecting all the innocent victims hit by the crisis and still satisfy the completely understandable public desire for justice and accountability. Those things were in direct and tragic tension, never resolvable at that time.

I always felt that the only preoccupation for people in policy at the time should be to fix the problem as quickly as we could, as effectively as we could, and only after that would other things be possible, including how to figure out not just how to clean up the mess, but reform the financial system.

That’s just silly. There is no tension between protecting the innocent victims and locking up the criminals who caused the Great Crash. None. And his claim that he wanted to do anything for the “innocent victims” is laughable. The truth is what he told Elizabeth Warren and Neil Barofsky: he wanted to foam the runway with the financial corpses of the victims of mortgage and foreclosure fraud so that the banksters and the feral rich would have a soft landing. Geithner thinks us professional leftists who are outraged by the failure to prosecute banks and their criminal employees are short-sighted, if not stupid:

…I think that what really distinguishes countries in crisis are those that are lucky enough to have political leaders who are willing to take the brutal political cost of doing what’s necessary and those countries that waited and let the populist fires burn, or decided they were going to try to teach people a lesson and put populism ahead of other things.

So, it’s fine with him that there were no criminal prosecutions. The only relevant issue was the entire economy, and Geithner thinks he did great there:

I’m biased but I felt that in the basic strategy that the President embraced and that we put into effect, we did something that was incredibly effective for the broad interest of the economy and the financial system.

The results of that effectiveness are obvious, even if Geithner can’t grasp them. Unemployment is outrageously high. The middle class has been crushed by stagnant wages and huge losses in personal wealth, especially home equity. The poor are on the chopping block, with state after state trying to cut the meager assistance they provide and the President bent on cutting Social Security, Medicaid and Medicare. Retirees see their savings dwindle under years of zero to negative real interest rates. The megabanks are bigger and more dangerous than ever.

That “broad interest of the economy” Geithner talks about is to insure that the feral rich pay no price, and are rewarded with ever-increasing personal wealth and income. Geithener and Lanny Breuer are joined at the hip in carrying out the Obama program of wealth protection at any cost, including the rule of law. Read the rest of this entry →

Breuer Identifies Real Clients on Frontline then Quits

4:03 pm in Financial Crisis by masaccio

Lanny Breuer, Judge, Jury and Prosecutor, Rules for the Banksters

Lanny Breuer is out as head of the Criminal Division of the Department of Justice, according to the Washington Post. After his ratlike performance on Frontline (transcript here) it won’t be long before we find him at some creepy New York or DC law firm defending his best friends, the banks and their sleazy employees. His legacy is simple: too big to fail banks can’t possibly commit crimes, so minor civil fines and false promises of reform are punishment enough. Jamie Dimon couldn’t have put it better.

Breuer tried his best to dodge questions about why he violated his promise to Senator Kaufman that he was actually conducting an investigation of Wall Street fraud. Martin Smith, the interviewer, asks:

We spoke to a couple of sources from within the fraud section of the Criminal Division, and through mid-2010 they reported that when it came to Wall Street, there were no investigations going on; there were no subpoenas, no document reviews, no wiretaps.

Breuer responds: “we looked very hard at the types of matters that you’re talking about.” He doesn’t deny that there were no investigations; no subpoenas, no document reviews, no wiretaps. Instead, he tries to shift the subject to his pointless insider trading cases, his Ponzi cases, the Lee Farkas case (the mortgage firm Taylor, Whitaker and Bean), and a few hapless mortgage originator cases, and even a policeman defrauded by some fraud or other. Smith won’t let that pass. Eventually we get to the heart of the problem to Breuer:

But in those cases where we can’t bring a criminal case — and federal criminal cases are hard to bring — I have to prove that you had the specific intent to defraud. I have to prove that the counterparty, the other side of the transaction, relied on your misrepresentation. If we cannot establish that, then we can’t bring a criminal case.

But in reality, in a criminal case, we have to prove beyond a reasonable doubt — not a preponderance, not 51 percent — beyond any reasonable doubt that a crime was committed. And I have to prove not only that you made a false statement but that you intended to commit a crime, and also that the other side of the transaction relied on what you were saying. And frankly, in many of the securitizations and the kinds of transactions we’re talking about, in reality you had very sophisticated counterparties on both sides.

Smith says “You do have plaintiffs who will come forward and say that they relied on the reps and warranties, and they relied on the due diligence claims that were made by the bank.”

Breuer keeps talking, but he can’t worm out of this one. Smith then says:

“We’ve spoken to people inside the Residential Mortgage-Backed Securities Working Group who said that when they began their work in January, February, March of 2012 that they found nothing at the Justice Department in the pipeline, no ongoing cases looking at securitization.”

And lest we forget, Lanny reminds us that these cases have ramifications for the rest of the bank. I don’t know who told Breuer that indicting the investment banking arm of a megabank would destroy the bank, but that’s a piece of idiocy that he claims to believe. This is from a speech he gave last September:

In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects. Sometimes – though, let me stress, not always – these presentations are compelling. In reaching every charging decision, we must take into account the effect of an indictment on innocent employees and shareholders, just as we must take into account the nature of the crimes committed and the pervasiveness of the misconduct. I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake. And, in some cases, the health of an industry or the markets are a real factor. Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.

This concern is so touching. Too bad he and his team of responsible enforcers never thought about the impact on the families of Aaron Swarz, or any of the countless people serving time for possessing pot, or whistleblowers like John Kirakou and Thomas Drake.

The persistent questioning exposes Breuer’s idea of a hard look: he and his crack prosecutors read the offering documents and let the lawyers for the crooks explain why they make it just fine. They don’t need to issue subpoenas for e-mails that drive the civil cases filed by retirement funds and hedge funds that got screwed by the megabanks. They don’t need to haul the clerks and the functionaries into Grand Juries and find out what they knew and who they told. They don’t need to work up the chain to their bosses and on to the top. They don’t need to identify the lawyers from those white shoe firms that wrote those weasel words into the documents, haul them into the Grand Jury room and find out exactly what they knew and what those words meant. And most important, there is no need to let a jury decide their guilt. Breuer does all that for us.

Breuer is sleazy. But remember, he takes his orders from Attorney General Eric Holder and President Barack Obama. This administration refuses to prosecute. Read the rest of this entry →

Worship of the Financial Sector Reaches New Heights

8:00 am in Banksters by masaccio

The Worship of the Bull God Apis, by a follower of Filippino Lippi, National Gallery of Art

The utterly incompetent prosecutors at the Department of Justice politely decline to indict HBSC or any of its present or former employees. Because, you know, things like this just happen and besides some of the responsible people don’t live here, and some of them got fired and others lost their bonuses, which is punishment enough. And anyway, we can’t indict unless we find evidence that someone specifically intended to aid money laundering. Or, as the simpering Lanny Breuer puts it:

“As bad as HSBC’s conduct was, this is not a case where the HSBC people intended — intended — to create money laundering,” he said. “They did not have the controls in place that they needed.”

One of the relevant statutes, 18 USC §1956, can be found here. In short, it’s a crime

“…knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, [to] conduct or attempt to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity [and]

(B) knowing that the transaction is designed in whole or in part—
(i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; [grammatical changes to make readable.]

As used in this section—
(1) the term “knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity” means that the person knew the property involved in the transaction represented proceeds from some form, though not necessarily which form, of activity that constitutes a felony under State, Federal, or foreign law, regardless of whether or not such activity is specified in paragraph (7);

(f) There is extraterritorial jurisdiction over the conduct prohibited by this section if—
(1) the conduct is by a United States citizen or, in the case of a non-United States citizen, the conduct occurs in part in the United States; and
(2) the transaction or series of related transactions involves funds or monetary instruments of a value exceeding $10,000.

Here’s an example of what HBSC and its employees did, taken from the Statement of Facts attached to the Deferred Prosecution Agreement (thanks, USA Today).

… [D]rug traffickers were depositing hundreds of thousands of dollars in bulk U.S. currency each day into HSBC Mexico accounts. In order to efficiently move this volume of cash through the teller windows at HSBC Mexico branches, drug traffickers designed specially shaped boxes that fit the precise dimensions of the teller windows. The drug traffickers would send numerous boxes filled with cash through the teller windows for deposit into HSBC Mexico accounts. After the cash was deposited in the accounts, peso brokers then wire transferred the U.S. dollars to various exporters located in New York City and other locations throughout the United States to purchase goods for Colombian businesses. The U.S. exporters then sent the goods directly to the businesses in Colombia.

HBSC admits that this is true in the Deferred Prosecution Agreement. Indicting the people who did this is apparently asking too much of these incompetent prosecutors. Here’s a clip of Lanny Breuer explaining (at about the 1:15 minute mark) that this agreement that no one is criminally liable is really a triumph of the prosecutorial art.

The reporters who go to press conferences like Breuer’s don’t know enough to ask Breuer and his crowd of incompetents which part of the statute they can’t prove. And why they can’t extradite and try anyone in any other country who was involved. The Statement of Facts is full of similar stories and identifies the kinds of people subject to indictment. And I bet the junior criminals would rat out their superiors in a heartbeat.

Breuer hides his bank love behind a statement of facts drafted to make it look like the only problems with this criminal money laundering business were mere negligent administrative screw-ups, and that’s nothing, now is it, Lanny? The clown prosecutors can’t imagine that a bunch of people thought they could make a huge pile of money laundering cash for drug cartels, terrorists and other scum of the earth. Now that they have slapped HSBC on the wrist, Lanny and his posse of lawyers who passed the bar on their third try can get back to work prosecuting pot smokers.

Knowing that his legal rationalizations are stupidly false, Breuer seeks the refuge of neoliberal apparatchiks: think of the jobs! Indicting this nest of rattlesnakes would lead to shutting down its US operations, costing jobs and disrupting the economy. That isn’t true either. Remember Riggs Bank? When it got caught doing a lot of the same stuff, it got clobbered, and shut down the criminal operation. The rest was absorbed into another bank. Why shouldn’t that happen to HSBC? Why shouldn’t we shut down their US operations?

The Obama administration regularly sacrifices the rule of law in adoration ceremonies to the Baals of the Financial Sector. The smoke rises to the heights proving their devotion, as the bag boys rush into the sacristy with some of that blessed money.