Laundering $800 Mil in Drug $, How Did HSBC Execs Avoid Jail?

Matt Taibbi: After Laundering $800 Million in Drug Money, How Did HSBC Execs Avoid Jail?

https://www.youtube.com/watch?v=K800WHFqy1g

....same as Citigroup did in the 1980's! Pay for the politicians.

Jail is for the serfs. You should know that.

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Originally Posted by Ben

Matt Taibbi: After Laundering $800 Million in Drug Money, How Did HSBC Execs Avoid Jail?

https://www.youtube.com/watch?v=K800WHFqy1g

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They're too big to jail

Money and Good Lawyers.

Money does not buy you happiness only power and influence. (would love to be able to test that one lol)

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Originally Posted by nysprod

They're too big to jail

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The line of the week!:banana::cheers:

Imagine the stuff going on you don't hear about....

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Originally Posted by sexyasianescorts

Money and Good Lawyers.

Money does not buy you happiness only power and influence. (would love to be able to test that one lol)

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It doesn't buy happiness. That's fairly understood. But, you're right, it does bring power and influence....
An interesting book about the corrupting nature of our political system is called the Golden Rule by Tom Ferguson. (And, too, it goes back to the Powell Memo where Lewis Powell pointed out how the corporate class should and need to control the political system. As meaningful democracy diminishes the power of the, well, masters of the universe.)

Investment Theory of Politics

https://www.youtube.com/watch?v=RG5lQkkBqnQ

Corporate power in US knows few boundaries. The corporations budget for the fines they will receive as a cost of doing business and count on the fact that just like a casino even though they may lose a few, the odds are such that they are the house and house always wins.

These guys lobby the hell out of government at every level to get favorable judge appointments and laws that will favor them. They also create complex contracts with consumers that establish extraordinary limitations of liability and mandatory arbitration in front of arbitrators of the corporations choosing.

The reform movement of the early 1900's and the great depression of the 1930's somewhat leveled the playing field and the 1% in the US have been working ever since to reverse as much as they can of the gains of equity that were created by TR and FDR.

It has gone so far in the US that Ronald Reagan based on policy stance could not win a republican primary and that Barack Obama may just be a little to right of Richard M Nixon.

What is most scary is that if a catastrophic series of events demonstrating corporate governance gone amuck like we had first Enron-Tyco-etc and then the hole toxic assets crisis did not force serious shifts in power and oversight, just how bad will it have to get to reign in the corporate greed. And for what it is worth, by their very charters corporations are doing pretty much exactly what they are supposed to which is earning consistent profits for their shareholders with no regard for how it impacts anyone who is not a shareholder.

The HSBC guys are just the latest in a long and utterly dishonourable list. Our prisons all over the planet should be full of these rapacious bastards, who have learned nothing from the chaos and pain they have created and continue to be rewarded for it with increasingly big bucks.

The present financial crisis is without doubt the occasion on which capitalism finally jumped the shark.

I don't agree, prison is a knee-jerk reaction from people who don't think through the crime and its social context, which is why incarceration for people who are a danger to themselves and others is a reasonable sentence. Most people who are in gaol do not belong there, either because the crime was trivial and they -in the US in particular- have fallen foul of the Baseball Clause (Three strikes and you're out!); or because they were not involved in violent crime. The cost of keeping someone in prison for something like embezzlement can often exceed the money that was involved in the crime.

Surely the greatest punishment for bankers and brokers would be to seize their assets, which would also include funds in overseas banks; impose a travel ban; and impose the financial equivalent of a 'community service' order in which they must work for x number of years on a low to median salary while being obliged to spend half their weekend doing something useful for the community.

It might re-calibrate their sense of what things are worth and how wealth is created. They might even come up with a new idea to start a business creating jobs for people...but gaol? No.

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Originally Posted by robertlouis

The HSBC guys are just the latest in a long and utterly dishonourable list. Our prisons all over the planet should be full of these rapacious bastards, who have learned nothing from the chaos and pain they have created and continue to be rewarded for it with increasingly big bucks.

The present financial crisis is without doubt the occasion on which capitalism finally jumped the shark.

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Rather than jail wouldn't it be cool if we could just take all their assets and give them minimum wage jobs, 1 room flats in worn neighborhoods and employers that do not provide health insurance?

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Originally Posted by Stavros

I don't agree, prison is a knee-jerk reaction from people who don't think through the crime and its social context, which is why incarceration for people who are a danger to themselves and others is a reasonable sentence. Most people who are in gaol do not belong there, either because the crime was trivial and they -in the US in particular- have fallen foul of the Baseball Clause (Three strikes and you're out!); or because they were not involved in violent crime. The cost of keeping someone in prison for something like embezzlement can often exceed the money that was involved in the crime.

Surely the greatest punishment for bankers and brokers would be to seize their assets, which would also include funds in overseas banks; impose a travel ban; and impose the financial equivalent of a 'community service' order in which they must work for x number of years on a low to median salary while being obliged to spend half their weekend doing something useful for the community.

It might re-calibrate their sense of what things are worth and how wealth is created. They might even come up with a new idea to start a business creating jobs for people...but gaol? No.

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No prison for bankers who have deliberately rigged interest rates and cost their customers millions, who have knowingly laundered billions of drug money and have broken the law of their own or several territories? Sorry, Stavros, there's an element of cold logic in what you say, but no justice.

Let's not forget that two years ago youngsters in the UK, however out of control, were being sent to jail for 18m or more for stealing bottles of water. There needs to be equity of treatment before the law, or the law loses its moral power and the state, ultimately, its right to govern. Just because the bankers haven't inflicted physical violence on their victims doesn't mean that the overall impact of their crimes is any less; we all know that the effect of their knowing and wilful negligence has cost the world billions in costs, jobs and ruined lives. White collar crime is never dealt with appropriately, blue collar crime is invariably dealt with harshly.

Robert you are concerned to inflict punishment on people convicted of crimes, but you haven't given serious thought to what it should be, just the standard 'lock 'em up'. Prison for the most part doesn't work, and the reason why what you call 'blue collar crime' results in a custodial sentence is due to the violence it often inflicts on people and property.

The issue is not prison or not prison for people like Bernard Madoff who ruin people's lives, but what is the appropriate punishment for the crime? Madoff in the security of his gaol cell doesn't need to look any of his victims in the eye, every day, as he would if his punishment was to lose his liberty and be expected to clean their homes, mow their lawns and so on. If you decide that someone who breaks the law ought to lose their liberty, then if the crime did not suggest the person is a threat to others and himself/herself, why spend so much money keeping them in prison?

I haven't bothered, and don't have the time, to Google this, but am I not right in saying that HSBC was not shown to have laundered drugs money? Is it not in fact the case that HSBC was shaken down for failing to show that its systems were capable in theory of preventing use of the bank for laundering drugs money?

from a quick Google Search

Rolling Stone
Despite the fact that HSBC admitted to laundering billions of dollars for Colombian and Mexican drug cartels (among others) and violating a host of important banking laws (from the Bank Secrecy Act to the Trading With the Enemy Act), Breuer and his Justice Department elected not to pursue criminal prosecutions of the bank, opting instead for a "record" financial settlement of $1.9 billion, which as one analyst noted is about five weeks of income for the bank.

Read more: http://www.rollingstone.com/politics...#ixzz2KMJDYTWA
Follow us: @rollingstone on Twitter | RollingStone on Facebook

NBC
A "pervasively polluted" culture at HSBC allowed the bank to act as financier to clients moving shadowy funds from the world's most dangerous and secretive corners, including Mexico, Iran, Saudi Arabia and Syria, according to a scathing U.S. Senate report issued on Monday.

The report [link to PDF here] which comes ahead of a Senate hearing on Tuesday, said large amounts of Mexican drug money likely passed through the bank.

HSBC's U.S. division provided money and banking services to some banks in Saudi Arabia and Bangladesh believed to have helped fund al-Qaida and other terrorist groups, according to an Al-Jazeera story on the report.

While the big British bank's problems have been known for nearly a decade, the Senate probe detailed just how sweeping the problems have been, both at the bank and at the Office of the Comptroller of the Currency, a top U.S. bank regulator which the report said failed to properly monitor HSBC.

"The culture at HSBC was pervasively polluted for a long time," said Senator Carl Levin, chairman of the U.S. Senate Permanent Subcommittee on Investigations, a Congressional watchdog panel.

The report comes at a troubling time for a banking industry reeling from a multi-country probe into the manipulation of global benchmark rates. Last month, rival British bank Barclays agreed to pay a $453 million fine to settle a U.S.-British probe into the rigging of the benchmark interest rate known as the London interbank offered rate, or Libor.

These people weren't shaken down, they were left to walk paying what in bankers dollars was a minor fine!

http://www.justice.gov/opa/pr/2012/D...-crm-1478.html

Hm. The link above, which appears to be the US DoJ's definitive statement on the subject, is evasive. It skips from an initial claim that the 'crime' was as I described to an elaborated claim that actual drug money-laundering prosecutions followed.

What seems to me to be lacking is what, in even the prosecutorially happy US, I imagine is the requisite evidence that HSBC staff were deliberately laundering the proceeds of crime.

Nice little business you've got there, shame if somefink nasty were to 'appen to it. How's about an arrangement. We'll make sure no 'arm comes your way, an' you see us right?

One other thought occurs: in the link above, some apparatchik or other is quoted as saying banks are the first line of defence against drugs/money-laundering.

Since when was nominally private business an arm of government policy?

"Nice little business you've got there, shame if somefink nasty were to 'appen to it. How's about an arrangement. We'll make sure no 'arm comes your way, an' you see us right?"

Ha, I can't tell if this is the Geico Gecko or some shady character from a British gangster film speaking. Certainly no Oxford educated Brit would talk like that!

They didn't prosecute the bank criminally. We've talked about this on this forum and I haven't done the research myself but if anyone knows I'd be interested. What would the criminal penalties be for the enterprise? Larger fines, injunction, temporary shutdown?

Why didn't they prosecute the individuals who signed off on these dirty transactions? Couldn't prove intent? No jurisdiction to pursue the matters overseas? Worried it might have negative effects on credit markets?

Again, I'm not making excuses for them at all as I posit that last question because it would be such a deplorable excuse not to prosecute. On the other hand, why would the DOJ not want a high profile prosecution if winning it would be so easy? Fivekatz has given some reasons and they are compelling in the abstract, but that's what we have right now. Perhaps it is corporate power greasing the wheels of the justice system; on the other hand perhaps there are practical issues such as evidence problems and the DOJ made a deal as prosecutors often do when it's easier to get some version of what you want in advance than face protracted litigation.

There does need to be a better deterrent for corporate crime. Prosecutions are few and far between. Maybe a better way to deter bad behavior would be to give companies incentives to clean house. I don't know if such laws would violate due process (or already exist), but if corporations could lower their liability by cleaning house and firing their corrupt executives this might make said executives less likely to be dishonest. If they fear unemployment as much as prison, it would be an internal mechanism for preventing such corruption. For instance, when their compliance department comes across violations of their own policies if the bank would get virtual immunity for blowing the whistle or firing the individuals, this might be more effective institutionally than one prosecution at a time. It might lead to scapegoating as well, but just a thought.

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Originally Posted by an8150

http://www.justice.gov/opa/pr/2012/D...-crm-1478.html

Hm. The link above, which appears to be the US DoJ's definitive statement on the subject, is evasive. It skips from an initial claim that the 'crime' was as I described to an elaborated claim that actual drug money-laundering prosecutions followed.

What seems to me to be lacking is what, in even the prosecutorially happy US, I imagine is the requisite evidence that HSBC staff were deliberately laundering the proceeds of crime.

Nice little business you've got there, shame if somefink nasty were to 'appen to it. How's about an arrangement. We'll make sure no 'arm comes your way, an' you see us right?

One other thought occurs: in the link above, some apparatchik or other is quoted as saying banks are the first line of defence against drugs/money-laundering.

Since when was nominally private business an arm of government policy?

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As to your first thought of the lack of reams of evidence, what essentially happened here is that HSBC basically plea bargained this case in part to avoid the full disclosure and in part because if the full judicial process did take place it would cost the bank far more.

Banks are not ordinary private businesses in the US and by charter are required to report all large and unusual transactions, much of which is residual of efforts to contain organized crime (mafia) versus organized crime by corporations.

If in fact the US government were prosecution happy the trail of damning evidence that Goldman-Sachs left behind as it advised clients to buy CDOs that it not only knew were to quote their own internal e-mails "shit" but also had the balls to by SCDOs betting on the failure of the products they were selling customers would have been enough to prosecute quite a few at GS.

So far the US DOJ has gone lightly on the financial institutions and the sad part is that risk of moral hazard could not be enforced because it would have literally taken down the world economy. Right or wrong the US administration has felt that if they hit the financial institutions to the letter of the law that it would create so much insecurity in the markets that consequences could be catastrophic if they did nail GS, Citi, BOA etc for the full range of their illegal activities.

So the whole principle of laissez faire capitalism hinges on moral hazard. But when banks become too big to fail, there can not be moral hazard. Perhaps no corporation demonstrates better than Goldman did that these folks know exactly what they are doing and know too well how the system works and that payoff even when caught is tremendous. Whether he was right or wrong Tim Geitner and the Obama Administration believed the system was to fragile to even enforce the existing laws, let alone passing meaningful financial reform.

Capitalism is a great system, it provides incentive and reward that brings out the best in people but unregulated it is a destructive system that brings out greed and the worst in people.

Fivekatz, HSBC was not unregulated. And it was not a laissez faire operation, as you seem to acknowledge in your remarks about too-big-to-fail banks (ie. they're too big to fail because they have state guarantees).

I suspect, although I do not know, that broncofan is right that the US DoJ had insufficient evidence for criminal prosecutions, or at least for prosecutions that would net serious convictions. And I'd add a suspicion of my own that the DoJ's cost-benefit analysis concluded that it would net more (ie cash) through a DPA than through costly trials of insignificant middle managers.

Anyway, the anti-drugs laws are both asinine and wicked, so I couldn't give a damn about their enforcement.

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Originally Posted by an8150

Fivekatz, HSBC was not unregulated. And it was not a laissez faire operation, as you seem to acknowledge in your remarks about too-big-to-fail banks (ie. they're too big to fail because they have state guarantees).

I suspect, although I do not know, that broncofan is right that the US DoJ had insufficient evidence for criminal prosecutions, or at least for prosecutions that would net serious convictions. And I'd add a suspicion of my own that the DoJ's cost-benefit analysis concluded that it would net more (ie cash) through a DPA than through costly trials of insignificant middle managers.

Anyway, the anti-drugs laws are both asinine and wicked, so I couldn't give a damn about their enforcement.

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My comment about laissez faire was more about the unregulated parts of banks, which were and shockingly still are CDOs and Synthetic CDOs.

As far as the banks being too big too fail, the government had to bail the banks and AIG out after the fact because the tenants of moral hazard could not be allowed to apply without meltdown the world financial system. Now banks aren't laissez faire operations regardless and I do realize that, but they are't regulated well enough if they are too big fail and too foolish to avoid failure.

Alan Greenspan who through out his career fought for free markets and that markets would regulate themselves organically, that moral hazard would temper reckless behavior. But after the meltdown he stated he never imagined that people would be so greedy or so reckless.

As far as a cost-benefit factor, I am sure you are right that the settlement was a good move for DOJ, but I am not as sure as you are that this is all the work of middle management and not a corporate governance issue. Certainly Lehman in finance and Enron in energy trading are just two examples of senior management having knowledge of malfeasance.

As for drug laws, I have mixed feelings. I certainly think that the prohibition against marijuana is stupid and is costing us as tax payers way too much money needlessly enforcing those laws and incarcerating the users. But I have a hard time with Meth and other destructive substances that can so quickly addict and destroy the user.

If you're worried about moral hazard, fivekatz, then bailouts presumably do little to reassure you.

Greenspan, incidentally, may have started his career as a free market capitalist red in tooth and claw, but the very fact that he had a career as a central banker betrayed those principles: central planning for banks and money should be as anathema to us as central planning for food.

I should add, fivekatz, that too-big-to-fail banks have been a problem for at least fifteen years, probably longer. That situation occurred becuase of regulation and government intervention. In 19th century Britain, banks quite routinely failed. That was accepted as a normal, if for depositors regrettable, fact of life. And banks were much, much smaller than now. Moral hazard and caveat emptor came close to ruling in a market that came close to being free. And when occasionally banks failed, nobody thought this fact threatened the world, or even merely the British, financial system.

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Originally Posted by an8150

In 19th century Britain, banks quite routinely failed. That was accepted as a normal, if for depositors regrettable, fact of life.

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Compared to the US there were fewer bank failures in the UK in the 19th of which two were large and important -Overend, Gurney & Co in 1866, and the Bank of Glasgow in 1878. That you should dismiss the disappearance of someone's life savings as 'a normal, if regrettable, fact of life' underlines the pure hypocrisy of free market capitalists who believe the protection of private property is the protection of freedom itself -until this unnatural system robs people of that very same property, whereupon it is wished away as something to do with markets rather than the incompetence of bankers, while their 'freedom' turns out to be not worth protecting at all.

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Originally Posted by Stavros

Compared to the US there were fewer bank failures in the UK in the 19th of which two were large and important -Overend, Gurney & Co in 1866, and the Bank of Glasgow in 1878. That you should dismiss the disappearance of someone's life savings as 'a normal, if regrettable, fact of life' underlines the pure hypocrisy of free market capitalists who believe the protection of private property is the protection of freedom itself -until this unnatural system robs people of that very same property, whereupon it is wished away as something to do with markets rather than the incompetence of bankers, while their 'freedom' turns out to be not worth protecting at all.

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How, then, Stavros, should I express my regret at the consequences of bank failure the better to demonstrate just how cut up about human misery I am? Would tears and the gnashing of teeth be sufficient? Or, borrowing freely from The Sun, should I show you my grief?

Private property is certainly intrinsic to the maintenance of freedom, and intrinsic to the nature of private property is the ability to lose it. Remove that ability, and you remove one of private property's central characteristics. Freedom includes the freedom to fail and to lose: there is nothing in the belief in the essential characteristics of private property, and in their maintenance in law, which is incompatible with freedom. Your definition of freedom, on the other hand, is tantamount to decision-makers, of whom I suppose you imagine yourself one (see Kip Esquire's Law), deeming who should get what. Which of course is not freedom, it's merely an abuse of language.

But you confuse more than just that: you confuse incompetence with robbery, a subject dealt with on page 1 of Ethics for Dummies.

As for 'unnatural system', I thought you Proggies were all in favour of Natural Selection.

It is difficult because allowing banks to fail creates the crowd psychology that makes them fail too frequently. You have runs on banks because investors do not feel secure and since banks run on fractional reserves, such failures would happen too often. The answer in the U.S was FDIC insurance, which is a subsidy to banks, but also encourages the moral hazard we are talking about because being insured tends to increase risk-taking behavior. The response is that by accepting the subsidy the subsidized also accepts the burdens of greater regulation.

Greater capital reserves, safer portfolio of investments, restrictions on the size of loans it can make. I don't see how banks can operate without major regulatory oversight. This is imo one of the weakest arguments of the laissez faire advocates. Banks do not have incentives to play smart as they are investment vehicles run on tremendous financial leverage. They hold in cash a fraction of what they lend and even if they were not insured they would take risks they could ill afford. Why? Because when you get control over more capital than you invested in equity, you know your losses are limited to your equity investment but your upside is much greater.

The problem with letting them fail is that some would fail without even being a credit risk because of public insecurity (bank runs). There needs to be some security on people's hard earned money or people would not use banks and this would shrink the economy because who would lend money if it were not someone elses'? Too big to fail is a monster created by the regulatory system but is far better than the alternative.

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Originally Posted by an8150

Your definition of freedom, on the other hand, is tantamount to decision-makers, of whom I suppose you imagine yourself one (see Kip Esquire's Law), deeming who should get what. Which of course is not freedom, it's merely an abuse of language.

As for 'unnatural system', I thought you Proggies were all in favour of Natural Selection.

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I haven't volunteered a definition of freedom, and the post is not about me but about your utopian fantasy, in which the operations of the market take place in a world of risk and reward and everyone merrily agrees that you win some and you lose some. Your defence of free market capitalism is as fantastic as a Trotskyist insisting that after the revolution all these problems will be solved. What you cannot do is justify private property as the natural condition of mankind, it is an historical formation, and integral to the slavery which your free market capitalism is dependent upon, which you cheerily inform us is freedom. We have but the one earth, to share in common.

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Originally Posted by broncofan

The problem with letting them fail is that some would fail without even being a credit risk because of public insecurity (bank runs). There needs to be some security on people's hard earned money or people would not use banks and this would shrink the economy because who would lend money if it were not someone elses'? Too big to fail is a monster created by the regulatory system but is far better than the alternative.

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Just as a piece of utilitarian calculus, is it?

Go back to my example of the Victorian banks. Yes there were runs. One one occasion (in fact shortly before Victoria acceded), political activists tried to bring down the government by creating a bank run. And yes there were failures, but none that threatened economic civilisation as then conceived. Just as a piece of utilitarian calculus, then, smaller banks, greater spread of risk, fewer significant consequences when the inevitable failures occasionally happened. That's the alternative to the monster.

Couple of other points: in the early days of FRB bank reserves in England were often many orders of magnitude higher than under the Basel Regulations.

Also, if people want nothing but security for their money, as a store of value, there are always safety deposit boxes. In a fiat currency system, however and of course, constant debasement of the currency makes these less attractive than taking the risk of depositing with a bank in the hope of some slight return in % interest.

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Originally Posted by Stavros

I haven't volunteered a definition of freedom, and the post is not about me but about your utopian fantasy, in which the operations of the market take place in a world of risk and reward and everyone merrily agrees that you win some and you lose some. Your defence of free market capitalism is as fantastic as a Trotskyist insisting that after the revolution all these problems will be solved. What you cannot do is justify private property as the natural condition of mankind, it is an historical formation, and integral to the slavery which your free market capitalism is dependent upon, which you cheerily inform us is freedom. We have but the one earth, to share in common.

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Either, in my utopia, everyone merrily agrees that you win some and you lose some, or, in my utopia, all these problems will be solved. Both propositions cannot be correct. That being the case, there is nothing fantastical about my utopia.

And as for the proposition that what I call freedom is what you call slavery, well, you're talking Cantonese and I'm stuck with Spanish.

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Originally Posted by an8150

Just as a piece of utilitarian calculus, is it?

Go back to my example of the Victorian banks. Yes there were runs. One one occasion (in fact shortly before Victoria acceded), political activists tried to bring down the government by creating a bank run. And yes there were failures, but none that threatened economic civilisation as then conceived. Just as a piece of utilitarian calculus, then, smaller banks, greater spread of risk, fewer significant consequences when the inevitable failures occasionally happened. That's the alternative to the monster.

Couple of other points: in the early days of FRB bank reserves in England were often many orders of magnitude higher than under the Basel Regulations.

Also, if people want nothing but security for their money, as a store of value, there are always safety deposit boxes. In a fiat currency system, however and of course, constant debasement of the currency makes these less attractive than taking the risk of depositing with a bank in the hope of some slight return in % interest.

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I follow your logic (I'm fine with utilitarian calculus in this example). And yes it makes sense if you can choose between many small failures and huge conglomerates failing, you choose the former. But I don't think small banks are much less susceptible to systemic failure than the conglomerates. When people hear macroeconomic news and want their money, they want it from their regional bank just as quickly.

As you say with your reference to Basel Regulations, the bank regulators are always figuring out new metrics to test for strength because you can meet all capital requirements but hold really low quality assets. The assets can also have risk that is all positively correlated and so will tend to a credit risk at the same time. So it's incredibly tough to use rules of thumb to make sure banks are well managed.

I think the federal insurance program we have in the U.S. has on balance helped prevent calamity. There are problems with it and it does increase industry concentration and moral hazard, but public fear is too great when it comes to money already earned. If we didn't have this insurance and people really were rational they would be demanding all sorts of exorbitant interest rates on simple checking even. Lower interest rates on checking are one of the most important sources of subsidy to the banks.

With uninsured banks, I don't think there would be enough liquidity for a large scale economy. It goes without saying I could be wrong. Tell me how.

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Originally Posted by broncofan

I follow your logic (I'm fine with utilitarian calculus in this example). And yes it makes sense if you can choose between many small failures and huge conglomerates failing, you choose the former. But I don't think small banks are much less susceptible to systemic failure than the conglomerates. When people hear macroeconomic news and want their money, they want it from their regional bank just as quickly.

As you say with your reference to Basel Regulations, the bank regulators are always figuring out new metrics to test for strength because you can meet all capital requirements but hold really low quality assets. The assets can also have risk that is all positively correlated and so will tend to a credit risk at the same time. So it's incredibly tough to use rules of thumb to make sure banks are well managed.

I think the federal insurance program we have in the U.S. has on balance helped prevent calamity. There are problems with it and it does increase industry concentration and moral hazard, but public fear is too great when it comes to money already earned. If we didn't have this insurance and people really were rational they would be demanding all sorts of exorbitant interest rates on simple checking even. Lower interest rates on checking are one of the most important sources of subsidy to the banks.

With uninsured banks, I don't think there would be enough liquidity for a large scale economy. It goes without saying I could be wrong. Tell me how.

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I often think, broncofan, that in a libertarian world we would have had less economic development (or, if not less, then certainly different, more diffuse, with greater variety, and more opportunities to opt out and to avoid the blandishments of Big Business in governments' Big Tent; curious perhaps, but there is a hippy lurking inside most libertarians), so, without trying to pin down the meaning of 'large scale economy', to some extent I can see your point. Actually, as an aside I am sometimes amused and irritated by the fact that in the 'Progressive' and corporatist social democratic state we have the extensive motorway networks that, on other days with their Green hats one, the same 'Progressive' corporatist social democrats lament (I sometimes wonder whether, for this, Hitler, vegan pioneer of motorways and Romatic lover of unravaged forestry, is laughing at us from Hell); extensive motorway networks are, it seems to me, unlikely to have developed in a libertarian society. As another aside, talk of x (e.g. training children), y (e.g. house price inflation), z (what-you-will) as being of importance to the 'national economy' gives me the creeps. At best it's mercantilist propaganda, at worst, quasi-totalitarian dragooning. But anyway, back on topic, even if you're right that "[w]ith uninsured banks, I don't think there would be enough liquidity for a large scale economy", arguably the greatest periods of economic growth known to either your nation or mine were in the 18th and 19th centuries. With uninsured banks.

So, who knows what might have happened in an alternative universe? Certainly not I, although I'd be prepared to offer a few generalised predictive hostages to fortune. But actually, as always, that's the Big Argument for Big Government: stick with us, we'll see you right. I can understand why that appeals to the craven, the cowardly, the lazy, and even to those merely lacking self-confidence. I just happen to think it's a shame that entire populations, and particularly those of our two great nations, have been engulfed by this enervation. And, while I'm in full flow, that the Tribunes of this passivity trumpet their abasement as virtue.

A final though occurs, broncofan. Does your monster have a name? Is it Leviathan?

I am not sure what libertarian world we would look like if it was pure but IMHO you sure as heck can't have a standing army and taxation to support that army in times of peace and call that society libertarian. That alone means the USA has gone so far down the 'rabbit hole" that it can never be a pure libertarian society, because the society as constructed would take such a body blow between the death of the corporations that sell products to that standing military and all the members of the military that find themselves out of work that it might take the society a generation to dig out from under it.

There is in theory a lot that is great about Libertarian philosophy. I believe many laws regulating personal choice (drugs etc) are dumb. But the leap from here (where capitalism is today) and there is too far.

Just as on the flip side universal single payer health care in the US is too far a leap in economy that is loaded with private insurance, hospitals etc. And while such health care (universal single payer) is so anti-libertrian, if a country is going to spend whole ton of taxpayer dollars on something, should it be an army 8X's larger than anybody else's defending American business interests or should it be on defending America's citizens from disease?

At any rate the US has gone to far down the road to be pure, so the government can choose between making life better for everyone or making life better for the 1% because government is far too intrusive at this point to ever get back to pure libertarian ideals.

And on balance in IMHO the government in US needs to move center-left. Argue as they might about the greatness of the Reagan revolution the life of the vast of majority of Americans is not better in 2012 than it was in 1980.

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Originally Posted by fivekatz

I am not sure what libertarian world we would look like if it was pure but IMHO you sure as heck can't have a standing army and taxation to support that army in times of peace and call that society libertarian. That alone means the USA has gone so far down the 'rabbit hole" that it can never be a pure libertarian society, because the society as constructed would take such a body blow between the death of the corporations that sell products to that standing military and all the members of the military that find themselves out of work that it might take the society a generation to dig out from under it.

There is in theory a lot that is great about Libertarian philosophy. I believe many laws regulating personal choice (drugs etc) are dumb. But the leap from here (where capitalism is today) and there is too far.

Just as on the flip side universal single payer health care in the US is too far a leap in economy that is loaded with private insurance, hospitals etc. And while such health care (universal single payer) is so anti-libertrian, if a country is going to spend whole ton of taxpayer dollars on something, should it be an army 8X's larger than anybody else's defending American business interests or should it be on defending America's citizens from disease?

At any rate the US has gone to far down the road to be pure, so the government can choose between making life better for everyone or making life better for the 1% because government is far too intrusive at this point to ever get back to pure libertarian ideals.

And on balance in IMHO the government in US needs to move center-left. Argue as they might about the greatness of the Reagan revolution the life of the vast of majority of Americans is not better in 2012 than it was in 1980.

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You are right that hooking large numbers of people up to the dripfeed of state largesse makes it almost impossible, in ordinary political terms, to turn around. And it's not just the military which is a client. In certain parts of Europe, including in my own country, if you remove the bulk of state spending then most people would, at least in the short term, be left without income or means to support themselves. Blood would be spilled, as it has been in Greece. Which reminds me of a story about Napoleon who, when arriving at the scene of a battle in the process of being lost by one of his marshalls, was asked by that marshall how to get out of the mess he was in. "I would not have got into this position in the first place", replied Boney. Which is not a terribly helpful answer, but I suppose it is what a libertarian would say to the dilemma you've described. The problem with your prescription, fivekatz, is that, quite aside from its lack of principle ("we might as well be hung for a sheep as for a lamb"), eventually economic reality will catch up with us all: the nations of the western world are spending more than they can afford. Your own government spends $4 trillion for every $2 trillion it raises in taxes. The difference is your national debt. In two years' time the interest payments on that debt will be financing the Chinese People's Army. Eventually you will not be able to service the debt. You will default. There will be blood. So in the final analysis, it doesn't matter what I think, or what any of the 'progressives' and 'liberals' think. When the money's gone, it's gone. And the more sheep feeding from the trough when that happens, the more blood will be spilled when the trough is empty (I know, the idea of ravening sheep is difficult to imagine :)).

The irony is that the drive to create the New Jerusalem here on earth - government making life better for everyone, as you put it - is what will create a hell more vicious and devastating than any libertarian society so brutal as to lack government healthcare and welfare, yet apparently I'm the utopian.

Well, I don't know about y'all, but I'm still waiting for any kind of evidence that supports the egoist philosophy. If anything even remotely resembling a successful individualist society has ever existed, give me the where & when.

As for the ability to afford all this mythical "government largesse": All monies are coined by the state, & always have been. Money is merely an artificial concept to simplify barter. Nowadays it's nothing but numbers in a ledger, with a little bit of pocket change. We can crunch the numbers & afford anything we want. That's WE. Collectively.

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Originally Posted by an8150

You are right that hooking large numbers of people up to the dripfeed of state largesse makes it almost impossible, in ordinary political terms, to turn around. And it's not just the military which is a client. In certain parts of Europe, including in my own country, if you remove the bulk of state spending then most people would, at least in the short term, be left without income or means to support themselves. Blood would be spilled, as it has been in Greece. Which reminds me of a story about Napoleon who, when arriving at the scene of a battle in the process of being lost by one of his marshalls, was asked by that marshall how to get out of the mess he was in. "I would not have got into this position in the first place", replied Boney. Which is not a terribly helpful answer, but I suppose it is what a libertarian would say to the dilemma you've described. The problem with your prescription, fivekatz, is that, quite aside from its lack of principle ("we might as well be hung for a sheep as for a lamb"), eventually economic reality will catch up with us all: the nations of the western world are spending more than they can afford. Your own government spends $4 trillion for every $2 trillion it raises in taxes. The difference is your national debt. In two years' time the interest payments on that debt will be financing the Chinese People's Army. Eventually you will not be able to service the debt. You will default. There will be blood. So in the final analysis, it doesn't matter what I think, or what any of the 'progressives' and 'liberals' think. When the money's gone, it's gone. And the more sheep feeding from the trough when that happens, the more blood will be spilled when the trough is empty (I know, the idea of ravening sheep is difficult to imagine :)).

The irony is that the drive to create the New Jerusalem here on earth - government making life better for everyone, as you put it - is what will create a hell more vicious and devastating than any libertarian society so brutal as to lack government healthcare and welfare, yet apparently I'm the utopian.

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Free market capitalism is a liberation ideology; without the state as it is today, your arguments lack a target -you are dependent on the critique of contemporary capitalism to enable you to constantly say what is wrong without having to tell us what life will be like after the revolution. You refer to violence in Greece knowing full well that it is extremist neo-Nazis attacking immigrants from North Africa, the Middle East and the Indian sub-continent, and is part of the unresolved ideological fractures of the Balkans that date back to the dissolution of Ottoman rule there and which have shaped the garganuan mess that modern Greek politics has collapsed into.

As a free market capitalist I know you think all immigration controls are wicked and deplorable, but the simple truth is that you cannot conceive of a free market capitalist alternative to what we have now without getting all confused about what role in your Eden will be played by nationalism, globalisation, climate change, modern technology and its impact on jobs -like the Trotskyist waiting for the transition you wish it all away with the pie-in-the-sky fantasy of a politics free of government and taxation, economic relations regulated by markets, social relations shaped by individual self-interest, the majority of people living in the sunlit uplands of prosperity and bliss.

Or, politics in which democratically elected governments are replaced by the tyranny of market forces; in which economic relations are not controlled by any regulations so that 'meat manufacturers' can sell diseased rats as 'chicken burgers' and respond to customer complaints -nobody is forcing you to buy my burgers! And social relations shaped by violence, slavery and contempt for human rights.

Free market capitalism is a utopian fantasy in which privilege and wealth replaces the Nazi party as the arbiter of life and death. In this system, if your father's business goes bankrupt taking your inheritance with it, you force your father to his knees, and order him to open his mouth while you piss in it, just as Ayn Rand would expect you to deal with such a loser. Better still, lock him and the rest of the losers in your family into a barn, and set fire to it -why should the world carry this extra, surplus-to-requirements, breadcrumb begging extra bagagge?

An Idaho senator has introduced a bill that would require all high school students in the state to read Atlas Shrugged -evidence of the controlling mentality, the venal hostility to freedom that free market capitalists are addicted to. The fact that he doesn't even take it seriously underlines the contempt with which free market capitalists treats democracy. Or maybe he is just one of capitalsm's useful idiots? And in such a crowded market...

http://www.huffingtonpost.com/2013/0...n_2631414.html

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Originally Posted by an8150

So, who knows what might have happened in an alternative universe? Certainly not I, although I'd be prepared to offer a few generalised predictive hostages to fortune. But actually, as always, that's the Big Argument for Big Government: stick with us, we'll see you right. I can understand why that appeals to the craven, the cowardly, the lazy, and even to those merely lacking self-confidence. I just happen to think it's a shame that entire populations, and particularly those of our two great nations, have been engulfed by this enervation. And, while I'm in full flow, that the Tribunes of this passivity trumpet their abasement as virtue.

A final though occurs, broncofan. Does your monster have a name? Is it Leviathan?

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Libertarianism does tend to be efficient. I have pointed to market failures in such systems but they're not easy to correct. However, I point to these market failures not just to show challenges to the efficiency of pure free markets but also individual inequities suffered in the process.

To say that a market system is efficient says nothing about how capital is acquired. It says nothing about how it is distributed. It says nothing about what happens to individuals who are victims of a market failure, say through lack of information, and end up serving as a cautionary tale for others heeding their signals in the marketplace in furtherance of this sought after efficiency.

We have to consider in this calculus what happens to the person who has his money deposited at a bank when there's a bank run. The reason the government insures these banks, even if it is inefficient in the long run because of the costs we've talked about, is because it is unfair for any one individual to pay for a failure with his life's savings. In free market ideology, we might assume that individuals would be able to pick the more responsible banks and so the person who loses his money does so because he was seeking a higher return by taking on more risk. The truth is, this risk is not priced very efficiently by the market and someone could lose everything through no fault of his own. Credit risk is notoriously difficult to value.

When it comes down to it, Libertarians want a competitive system and they strive for efficiency (an aggregate number), but they forget about the people who through no fault of their own lose out in the process. There are basic things people are unable to live without. In a free market system, economic losers would be forced to go without for the benefit of some aggregate utility function. Life is not so easily reducible to mathematical abstractions. A hands off system avoids unintended consequences, but accepts all of the easily foreseen and avoidable misery. To me, this is a pessimistic ideology that says let the losers lose because helping them share in the economic success might involve some waste.

Gangster Bankers: Too Big to Jail

How HSBC hooked up with drug traffickers and terrorists. And got away with it

http://www.rollingstone.com/politics...-jail-20130214

Elizabeth Warren 1 - US Fed Regulators 0

The best argument the regulators could come up with is cost-benefit, but the problem with cost - benefit is if Jamie Dimon had to do 12 months maybe Goldman-Sachs and a few others may operate differently then you would have a true moral hazard in a world where financial institutions have become so big that world recession is the aftermath of their excessive gambles and quasi legal to illegal activities.

Forget Utopia, the world is what it is. Huge banks aren't the product of the FDIC, they were the product of repeal of regulation. Now I am not so naive that the repeal of Glass-Seaguall caused the all the issues of the meltdown, but it made it so much broader when players like Chase and Citi and an B of A could come to the party as players with FDIC insured deposits and drunken bets on sub-primes.

These people knew what they were doing. The fact that they leave the devastation richer for the experience as opposed to crushed, while individuals and institution investors got fucked is just wrong.

The philosophical arguments about pure capitalism is all well in good but that is not the world we live in. And in the world we live in companies like Goldman-Sachs, JP Morgan-Chase, Lehman Brothers, HSBC should be taken to the wood shed and the CEO's who either lead so poorly they hadn't a clue what was happening or led the charge, those dudes should spend some time in minimum security incarceration and that will create moral hazard.

What actually happened is bullshit and for all I am all for Obama his adminsitration let these guys walk away having earned a lot and learned nothing except the world can't live without them.

I'm not saying only fdic caused industry conglomeration but it may have been a factor because it helps enable banks to get deposits easily and for lower interest rates. Also, regulators have not applied Sherman anti-trust principles well enough to industry mergers. They've allowed too much concentration when many established methods for measuring industry concentration (HHI) have specifically contraindicated it. Other issues include loosening of interstate banking regulations, loose regulations respecting both bank holding companies and financial holding companies that allow companies to create a broader corporate umbrella and operate many different financial services companies such as securities brokerage, insurance brokerage as subsidiaries.

I'm for more regulation. I'm just saying that all regulation changes incentives in the marketplace. Providing insurance makes people take on more risk, but that's not a good enough reason for withdrawing it. It's a good reason to provide MORE regulation so that their new incentives are properly checked by bank regulators.

IMHO the real issue with the 2008 crash was a lack of regulation. There wasn't any regulation of CDO's or Synthetic CDOs. By calling the insurance of CDO synthetic it allowed insurance to be written without any oversight.

None of the banks who were "insuring" their CDO's with AIG had any idea how much money AIG had committed to insuring and AIG did not have to hold reserves for it. But AIG allowed the cover for the CDOs to be Triple AAA rated by Moody's and S&P. Besides the banks not seeing that AIG had inadequate capital reserves to back up the bundles of sub-primes, the government could not see it either thanks largely to the key players in the Clinton Administration (Ruben, Summers and Greenpan).

The other deregulatory gap that caused things to get really bad was the repeal of Glass-Seageall. It allowed Travelers (broker and insurance co.) to merge with a commercial bank (Citi Bank). Once the walls went down between investments banks and commercial banks the amount of activity in CDO's grew tremendously. The fact that the commercial operations had depositor insurance wasn't as much a factor as was the shear greed of the banks.

Now IMHO sub-prime was bound to happen, but if the wall had been kept to investment banks, all of sudden Merrill-Lynch, Lehman Brothers and Goldman Sachs aren't the same body blow to the world economy that JP Morgan-Chase, B of A, HSBC, Well Fargo etc were.

I would agree that weakening of interstate banking regulations contributed and will contribute to fuel the reality of too big to fail. My personal opinion is that if a bank is too big fail it is too big to exist as is and should be broken into individual units or seperate regional units. The efficency of scale of big banks is dwarfed by the risks to the public if the institutions failure can trigger a world recession if the taxpayers bail it out and a depression if they don't.

Whilst I understand and applaud the Obama administration's decision to take on the issues of health care reform in the US, I personally think that it was in some ways an easy out versus taking on the basic structure of Wall Street and reeling in the damage done from Reagan to Clinton to Bush and the natural tendency of a capitalist to find the loopholes and run through them.

Unbridled greed is at the core of capitalism and regulation is the bridle that allows it to survive without either it's taking itself down or the 99% toppling it.