http://www.aljazeera.com/news/americas/2012/12/20121210231156304799.html There are lots of other words in there, so do read it. Keep in mind that this is a settlement, so A) this has no ramifications for existing law and sets no precedents and B) they must have some SRS dirt up in dem papers if they were willing to pay the government that much. Speaking of which, we need some kind of law to stop the government from settling with banks all the fucking time.
We can't have one until the Fed learns to do monetary policy correctly. Otherwise killing off skeezebag corporations has AD and therefore economic impact.
You don't think firing all the executives at BP and nationalizing/selling off their assets would send a message to companies that when you let shit like Deepwater Horizon happen, it's not going to be pretty and no, it won't be business as usual?
I'd think it's perfectly possible to take over a company and wind it down in a way that minimizes AD problems.
The challenge is how does one implement it as a policy that can be applied equally to all corporations: do you kill a bank the same way you'd kill a gas pipeline the same way you'd kill a farm conglomerate the same way you'd kill a calendar retail store in the local mall? It gets more complicated with ownership issues: private equity, publicly traded, sole proprietorships, wholly owned subsidiaries, senior and subordinated debt, etc.
jeffd There's a big difference in market reaction to a nationalization of a failing entity like RBS in 08 and to something like a headshot of an international bank in good condition like HSBC. It'd be entirely unexpected, meaning share prices for it and other firms would need to shift in response to new information about potential risks from nationalization in mature markets (currently considered near zero outside of France, and even France walked back from a threatened nationalization of an ArcelorMittal plant). This would be a massive nominal shock because a fall in asset prices results in a fall in expected future income for holders of pension and mutual funds. Clearly a nominal shock requires a nominal stimulus, and just as clearly the Fed has shown time and again it is unwilling to engage in nominal stimulus. So no, I don't think that's the case unless you're arguing that markets are irrational. And if you're doing that we can basically just stop talking now because it's no longer possible to assess causality as any cause can have any effect. Ryan, those resource and gas extracting firms constitute a significant portion of pension and mutual fund holdings. They're reliable performers and big chunks of the market. Pension and mutual funds are composed of people like you and me. We're the ones that'd bear the burden of a nationalization. And for what? So that a lot of good people could lose their jobs over the fuckups of a few fucknuts? Punish the people and the company in a manner consistent with the rule of law and leave it at that.
Pointing out that the Fed isn't willing to take the sort of actions that'd be required to make left-wing fantasy corporate punishments less than catastrophic is applying a selectively rigorous standard of plausibility. And nationalizing (and presumably spinning off) firms doesn't mean there's less oil in the ground to underwrite granny's teaching pension or whatever, again, assuming the fantasy executive were accompanied by a fantasy federal reserve and a fantasy economic and political commentariat who stopped losing their shit after the first few times. Trusting in "the rule of law" to redress not-strictly-statutory economic criminality by corporations as entities, their leadership as individuals, and for the wider Greenwichsphere as a larger collection of individuals is... a ghastly joke.
Do you have a better option? Because it seems like the alternative on offer is arbitrary seizures of other people's stuff. Being as our society is founded on the concept of people owning what they own and only taking shit from someone using due process, that seems like a pretty shitty alternative. Well, unless you're a poor, your police department is corrupt and someone somewhere could possibly claim that your property with or without your consent or knowledge was used to commit a crime. In which case CIVIL ASSET FORFEITURE, BITCH. re: The Fed discussion, I'm taking an odd desire and explaining why that desire won't work using economics because that's what I understand. If you want a political horse race explanation for it, write it yourself!
Political doesn't necessarily mean arbitrary. Generally speaking political justice happens or is hankered for when no other kind is going to be forthcoming. I don't mean any sort of close analogy by saying this - still less a Godwin - but one could build an unassailable rule of law argument against almost all of the post-WWII legal proceedings. Handwaving nulla poena sine lege really ought to make one the world's shittiest rule-of-law-advocate and yet they happened anyway and most rule of law advocates are fine with it: the deviation from hallowed principle made moral and political sense. In what is plainly not a directly comparable sense, since 2008 I think I've lost my patience for the masters of the universe always getting away with it every fucking time. The public's indifference to civil asset forfeiture if anything makes that judgement easier for me.
I propose we re-institute The Harrowing. For those of you who don't remember, prior to the Alan-Ladd Act of 1964, when a corporation and its officers engage in institutional malfeasance, all employees and shareholders are summoned and transported to a deadly mineshaft full of traps and vengeful ghosts. Each trap is lethal but only fires once. The number of traps and length of the tunnel is dictated by a jury. The exit is one hundred feet above the floor of the end of the tunnel. The employees elect by majority vote, the order in which the officers of the corporation enter the tunnel. As soon as an employee is first to the end of the tunnel, he rings a bell tied to a rope which me must climb to escape. After each ringing of the bell, a primary institutional shareholder with voting stock is sent into the tunnel with a knife or a two shot pistol, depending on whether it is day or night when he or she enters. When the bell rings again, another shareholder enters the tunnel. Whoever climbs out of the hole first is the CEO. All shares belonging to extinguished shareholders are transferred to the nearest boy with the most beautiful shoes. Local charities are encouraged to decorate shoes, in hopes that their shoe boy will show gratitude in the form of restoring the people's pensions. His decision is only revealed through the releasing, or not releasing, of doves at the end of a seven minute ceremonial dance, typically in Country and Western style.
There is a thing about putting corporations in jail (which may be a good middle ground between death/nationalization and status quo) and I'd swear we talked about it here before, but I can't find previous discussions nor am I using the right search terms on Google to bring up any decent articles. I'll keep looking.
You know, besides fining the shit out of the corporation I'd like to see the people responsible for $2 Billions worth of criminal acts serve serious jail time. When you break the law you should have personal liability too.
More awake / less sick now: as currently structured just liquidating a major bank would be hideously disruptive. But there's no reason that our financial system has to be structured the way it is. I've seen precious little evidence that the US financial industry actually provides real value, vs. just skimming off the top of the economy. What's more, to a conglomerate like HSBC, 2bn is chump change. They'll have a rough quarter and then get back to business; there's little incentive for them to stop bad behavior.
Perhaps keep it simple and say the government simply can't settle and must go to court once the amounts involved reach a certain threshold. The settlement amount -- less than one tenth of a percent of their total assets simply doesn't seem punitive enough to change their behavior. Odds sound good that they made more than that in profit off their shenanigans. Moreover the people responsible undoubtedly made out like a bandit in terms of bonuses and stock options, while the payment is spread amongst all the shareholders. What disincentive is for them to merely endeavor to do a better job of not getting caught? 2 billion? Pshaw -- other people's money!
I agree, I think the penalties are puny as shit and I especially loathe that this wasn't handled out in the open in the court of law. If they're paying off the government to keep their execs out of jail -- which it quite looks like here, what with the TWO BEELION DOLLAR settlement -- that's fucking bullshit. One law for rich people and one law for poor people is fucking awful and makes me very, very mad. Also I too am sick jeffd (HOLY FUCKING NICE LOOK AT WHAT HAPPENS WHEN YOU TYPE @ + JEFF DAT MENU) so brofist.
I'm with you, but how exactly would this work for a multinational company? How can the US dissolve a corporation with headquarters in the UK? Can even the UK easily do this, considering all their subsidiaries and etc spread across apparently 85 nations?
Good question! It's a good thing I'm not some sort of politician whose job it is to figure this stuff out.
Perhaps via some sort of international treaty? More of you can't do business in member states if you've been naughty than actually attempting to destroy a bank, with a promise to go after as many assets as possible. Seems fraught with pitfalls though, not to mention difficult to envision ever coming about.
On the radio today I heard reporting to the effect that DOJ considered more serious consequences, including criminal charges against the bank and those involved, but decided it would be too destabilizing. So I guess the state of play is that big banks can flaunt the law. Great!
Yes, but no but yes. There's a large amount of bullshit / racketeering in these charges, and the precedent is interesting. One countries money laundering is another countries legitimate business. The dirt they had on HSBC and Standard Chartered was to shut their US operations down. In my field (airlines) it is getting to be a safety issue. Traditionally, crash investigations were to find the truth, and make sure lessons were learnt, and so people were open and honest. But with the rise of people being charged with manslaughter/ massive lawsuits over accidents the advice is now shut the fuck up.
That's ok, just send the people saying "shut the fuck up" to jail, preemptively. Omerta can be broken, and so can white collar solidarity. It just takes resolve. There are problems with torts, but they are generally vastly overstated in the context of instituting penalties for corporate misbehavior.
Eh? A pilot or an engineer makes a mistake that results in an accident. They are advised by their lawyer that to talk to the authorities will just give the authorities evidence that will result in criminal charges against them. Not sure that sending lawyers to jail for advising a client to essentially "plead the 5th" is legal, however satisfying it may be It's sad, because accidents are almost never down to single factors - the "swiss cheese" model.
I would have to see what the problems actually look like in these situations, because I find it difficult to believe that mistakes and accidents routinely result in criminal charges as part of NTSB investigations. What you're describing still sounds primarily like a company covering its ass by convincing individual fall guys that they will be held personally responsible for things that will reveal structural neglect or malpractice. Which, if it's true, is a normal use of the fifth amendment and appropriate if regrettable. In any case, my primary concern is with the lack of executive accountability in terms of business decisions that result in criminal acts or preventable accidents. The actual people doing the work are going to get hurt sometimes if they (for the many diverse reasons people in those situations do) end up becoming accessories to the acts in question, but it's not until the guys at the top have something to fear that the incentives change.
NTSB/ FAA is actually pretty good about not criminalising. Problem is more in EU and Japan, but with the global nature of the industry... But it does slow things up. Last month I received an Airworthiness Directive (i.e. a "must do") from the FAA. The crash that triggered the AD was in 2001... By moving the culture to a fingerpointing exercise, rather than a 'how do we stop this happening again' exercise, we've lost something. Aviation was probably a special case though, as with so many parties involved, and the massive economic impact of a crash, there is both a very complex chain, and incentive to, well, not crash. E.g. the Air France crash. Was it the fault of the pitot tube manufacturer, or Airbus, or AF training, or the pilots having a brain freeze. Concorde, you can blame on the manufacturer for not making fuel tanks strong enough, or the airport for not checking for debris on the runway, or Continental for allowing a bit of one of their aircraft to fall off, that was the debris that punctured the fuel tank that killed them all. That one did go to court, Continental were originally found criminally guilty, but at appeal Continental were found not guilty (though still had to pay some civil damages).
I understand your concern, but I think in the broader story of corporate accountability the "move to a fingerpointing culture" thing seems like a red herring. A red herring that is exploited on a massive scale when it comes to financial regulators focusing entirely on the specific expression of misconduct and its mechanical prevention rather than assigning responsibility, and doubly so in cases with clearly criminal or at the least wildly irresponsible behaviors within. By all means, solve the problems. But sometimes the problem isn't the problem.
Acknowledge. Of course, some of these sanctions I personally don't agree with but can see them as the price of doing business in USA (i.e. you allow the US government to say who you can and can't do business with elsewhere in the world) The mistake by HSBC & SC was to try and have their cake & eat it too. There's been a bit of a fuss here in HK with Iranian ships reflagging as Chinese. Will be interesting the first time that China decides to do the same - i.e. sanctions on Taiwan
The problem here is the richest people blatantly benefiting from a criminal enterprise at the expense of everyone else, essentially aided and abetted by the state. Knowing that their mess will be covered up even when evidence is found because it's "serious business" and they're "too big to fail" is what causes the self-serving and dangerous-to-society fraud in the first place. There's also a side order of different law enforcement for people explicitly depending on their difference in wealth level -- "Oh, these banksters were too important, so we just gave them a mild slap on the wrist and didn't press charges". It smacks of Russia under Putin. wisbechlad, I see your point about not incentivizing people to be quiet to protect themselves when it comes to airline safety. I'm don't think that really has much in common with wanting to hold accountable the wannabe Gilded Age barons responsible for such flagrant money laundering.
True! There's a fine line here -- it's important that such action be taken for obvious cases of fraud, and not just pursuit of "national interest". Otherwise you'll never get the sort of international cooperation needed to really reign these bastards in.
Lizard_King I like the expression mechanical prevention. It captures my annoyance with the modern regulatory environment and with that nigh obsessive focus on easily manipulated over specificity. Generality and government agencies making their case for why such and such a thing is a violation through the courts seems a better tool for ensuring the overarching goal of a level playing field for all economic actors. Level-er? I dunno, costs are a concern. It seems like that'd give more flexibility for saying "shit bad, prepare for the govfuckin" without leaving the opportunity for rules lawyer attacks. Maybe have it go through trials with specialist judges rather than a traditional jury trial? Or would that be worse? I dunno. Shit be complex. But I feel like I'm more comfortable with the openness of the judicial system than the opacity of the bureaucratic sausage factory.
"Plea bargaining" should be reserved for when law enforcement thinks it might not have a case strong enough to win in court, or wants to cut a deal in pursuit of bigger fish to fry. Once you get to the HSBC level there aren't really any bigger fish to fry, and their lawyers pack enough firepower they're not really worried if they think you have a weak case. What's the worst a government can do when you're spread across 85 nations anyway? The goal aught to be establishing preventive legal precedent, which you can only do in court.
What do you need the precedent for? The laws are already on the books. The problem is spending the enormous time and resources required to see any such case through to judgment and any perceived policy issues with doing so.
Because otherwise the precedent is that the laws, while "on the books", are in practice effectively ignored. And I simply do not buy that it is somehow too expensive to see through cases of fraud, as you imply. Compared to the scale of a 2 billion dollar settlement (with the amount of money involved likely considerably greater), the costs are minor. Note that I'm not suggesting that every such case must be brought to court, merely such large and criminal cases as this. Why should guys laundering money for various criminal cartels get off so easy? Merely because it might cost a bit to bring them to justice?
Just as long as we understand that this isn't a legal precedent so much as a warning sign, sure, makes sense. It is a matter of resource limitation. By way of example: Jeffrey Skilling was indicted on February 19, 2004. His trial did not begin until January 30, 2006. He was found guilty on May 25, 2006 and sentenced on October 23, 2006. That right there is two and a half years, and criminal cases often move faster than civil cases because of the right to a speedy trial. Think that's the end? Of course not! Subsequent developments in the law caused Skilling to challenge his conviction. The Supreme Court granted cert on October 13, 2009; argument in the case was held on March 1, 2010. A decision was rendered on June 24, 2010, vacating parts of the conviction. STILL NOT DONE. Thereafter, the case was remanded to the lower courts. On remand, the Fifth Circuit Court of Appeals confirmed the conviction in April 2011. Skilling sought Supreme Court review; the Court denied cert on April 16, 2012. That, finally, might be it--more than eight years after indictment. Major cases involving people with major resources take forever. For a variety of reasons, it would be inappropriate for me to advocate one way or the other about how things ought to work w/r/t prosecution of these kinds of cases. But I can tell you that, as a practical matter, it requires an enormous expenditure of time and money to see them through.
Resource limitation my ass. Setting the world on fire to take out these fuckers creates a disincentive for them to step out of line.
Personally I'm in favour of the US coming after the HSBC management as hard and as furiously as they can largely because the former chairman of HSBC, upon who much of the blame for this crimbroglio is being pinned, happens to be one of David Cameron's best buddies; Baron Green of Hurstpierpoint, and a minister in the current government. I mean the Tories are pretty unpopular already but I could stand to see them lose another 10% or so of their support before I'd feel really comfortable. Surely this case has the perfect cocktail of trigger words for US anger. A rich, British, stockbroker, aristocrat profiting off the backs of crime and terrorism on the streets of small town America? I heard that he also said in his autobiography that the American Football 'wasn't a proper game' and that George Washington 'had only one, tiny, John Thomas'.
Harumph. Wouldn't have happened in Willie's day (Willie Purves, legendary chairman of HSBC) Only National Service officer to be awarded the DSO - in Korea he led the way across a minefield telling his men to step where he stepped. Heh - I was on the outskirts of that circle. Was good friends with Cameron's cousins at college, and was a drinking acquaintance of Osborne back in the day too. I left UK long ago though, before they all became powerful.
