The U.S. Department of Justice (DOJ) was apparently so frightened by the possibility that criminally prosecuting the third-largest bank in the world would cause the global economy to implode, that it refused to initiate proceedings against the bank for its misconduct. Instead, the DOJ entered into a deferred prosecution agreement with HSBC, in which the bank admitted to engaging in widespread illegal conduct, paid a relatively insignificant fine and promised never to engage in such conduct again.
That deferred prosecution agreement was a sweetheart deal for HSBC. It is unlikely that the DOJ would have made a similar offer for similar wrongdoing to a smaller, less economically significant institution.
The settlement also appeared to signal the endorsement of a government policy — that some banks, by virtue of their excessive size and complexity, will be afforded preferential treatment under the law.
Such a “too big to jail” policy is indefensible. It offends any reasonable sense of equal justice under the law. Moreover, it will reinforce Wall Street’s culture of corruption, providing no deterrent for future wrongdoing.
Several steps, however, could be taken to make HSBC more accountable for its wrongdoing and provide more information about the government’s decision not to criminally prosecute the bank.
First, the Federal Deposit Insurance Corporation (FDIC) should grant Public Citizen’s request that the agency terminate HSBC’s depository insurance.
Next, Maryland Attorney General Doug Gansler should grant Public Citizen’s request that Gansler initiate proceedings to revoke HSBC’s corporate charter–its grant of authority by the state to do business as a U.S. corporation. More than 20,000 people have signed a petition echoing their support for such action.
Finally, the U.S. Department of the Treasury, the DOJ and the Office of the Comptroller of the Currency should grant Public Citizen’s FOIA requests seeking all records that pertain to the DOJ’s decision not to criminally prosecute HSBC.
Public Citizen is not alone in calling for stricter penalties for HSBC’s wrongdoing and a more complete examination of the government’s inadequate response.
For example, U.S. Sen. Carl LevinCarl Milton LevinHow House Republicans scrambled the Russia probe Congress dangerously wields its oversight power in Russia probe The Hill's Morning Report — Sponsored by CVS Health — Trump’s love-hate relationship with the Senate MORE (D-Mich.), chair of the Senate Homeland Security and Government Affairs Committee’s Permanent Subcommittee on Investigations, summarized the findings of a year-long probe of HSBC’s money laundering with this: “If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.”
Additionally, U.S. Sen. Charles GrassleyCharles (Chuck) Ernest GrassleyHow House Republicans scrambled the Russia probe Dem lawmaker spars with own party over prison reform Overnight Energy: Pruitt taps man behind 'lock her up' chant for EPA office | Watchdog to review EPA email policies | Three Republicans join climate caucus MORE (R-Iowa), ranking member of the Judiciary Committee, and U.S. Sen. Sherrod BrownSherrod Campbell BrownHillicon Valley: Facebook, Google struggle to block terrorist content | Cambridge Analytica declares bankruptcy in US | Company exposed phone location data | Apple starts paying back taxes to Ireland Overnight Health Care — Sponsored by PCMA — Trump hits federally funded clinics with new abortion restrictions Senate Dems call for probe into why Trump has not issued Russia sanctions MORE (D-Ohio), chair of the Banking Subcommittee on Financial Institutions and Consumer Protection, recently raised questions about the DOJ’s prosecutorial philosophy, asking “whether the ‘too big to fail’ status of certain Wall Street megabanks undermines the ability of the federal government to prosecute wrongdoing and impose appropriate penalties.”
While justice has not yet been served for HSBC’s rampant misconduct, it is not too late. There are other government actors that have the authority to hold HSBC accountable and send a clear message of deterrence to HSBC, as well as all other global megabanks: If you engage in criminal wrongdoing, you will be held accountable to the fullest extent of the law.
Hauptman is financial policy counsel for Public Citizen’s Congress Watch division.