Not Eric Holder again! By the way, I thought corporations were people . . .

 . . . and don’t people go to jail when they commit crimes? Well, they don’t when  the head of the Federal justice system is Eric Holder who is NOT stepping down for the second term and who was head of Justice in the spring of this year when this was going on.

HSBC Holdings Plc (HSBA)’s head of group compliance, David Bagley, told a Senate hearing he will step down amid claims the bank gave terrorists, drug cartels and criminals access to the U.S. financial system by failing to guard against money laundering.

Bagley was among at least six HSBC executives who testified before the Senate’s Permanent Subcommittee on Investigations today after the panel released a 335-page report describing a decade of compliance failures by Europe’s biggest bank. London-based HSBC enabled drug lords to launder money in Mexico, did business with firms linked to terrorism and concealed transactions that bypassed U.S. sanctions against Iran, Senate investigators said in the report.

So Mr. Bagley and his buddies said they were ever so sorry before heading back to the company ‘retreat’ at Cabo and after, of course, paying a fine in an amount that they can earn back in a week.

That’ll show ’em alright.

Obama’s Cabinet has included some really terrific, skilled and well-suited people. I don’t count Holder among them. I’ll admit to being ignorant regarding many of his policies and initiatives. Maybe they’re good. Maybe they’re great. But when it comes to punishing corporate ‘persons’, those whose crimes almost brought down the world economy? FAIL..

No investment bankers are in jail. No one from AIG is in jail. Not even anyone from Countrywide. Or Arthur Anderson. Or the other rating agencies. And how about LIBOR? Any US companies complicit in that?

By any  measurement, letting them off with fines is sufficient reason to judge him a failure. I suppose that only when they do it two more times will they, like the 20-year-old marijuana smoker down the street, head to the big house.

The five Senators who made up the Keating Five plus Mr. Keating (bottom right)

The five Senators who made up the Keating Five plus Mr. Keating (bottom right)

Anyone remember the Savings & Loan scandal in the Reagan years? It wasn’t as far-reaching as 2008, but it was pretty damn big. There were plenty of perp walks (but not for everyone, not for everyone – see below). A lot of people paid for their corporate crimes. But that’s s-o-o-o yesterday.

For you younger ones:

Savings and loan crisis in which 747 institutions failed and had to be rescued with $160 billion in taxpayer dollars.[33] Reagan’s “elimination of loopholes” in the tax code included the elimination of the “passive loss” provisions that subsidized rental housing. Because this was removed retroactively, it bankrupted many real estate developments which used this tax break as a premise, which in turn bankrupted 747 Savings and Loans, many of whom were operating, more or less, as banks, thus requiring the Federal Deposit Insurance Corporation to cover their debts and losses with tax payer money. This with some other “deregulation” policies, ultimately led to the largest political and financial scandal in U.S. history to that date. The savings and Loan crisis. The ultimate cost of the crisis is estimated to have totaled around USD $150 billion, about $125 billion of which was directly subsidized by the U.S. government, which further increased the large budget deficits of the early 1990s. See Keating Five.

Who were the Keating Five you may ask? And why are they relevant?

The Keating Five were five United States Senators accused of corruption in 1989, igniting a major political scandal as part of the larger Savings and Loan crisis of the late 1980s and early 1990s. The five senators – Alan Cranston (Democrat of California), Dennis DeConcini (Democrat of Arizona), John Glenn (Democrat of Ohio), John McCain (Republican of Arizona), and Donald W. Riegle, Jr. (Democrat of Michigan) – were accused of improperly intervening in 1987 on behalf of Charles H. Keating, Jr., Chairman of the Lincoln Savings and Loan Association, which was the target of a regulatory investigation by the Federal Home Loan Bank Board (FHLBB). The FHLBB subsequently backed off taking action against Lincoln.

Lincoln Savings and Loan collapsed in 1989, at a cost of over $3 billion to the federal government. Some 23,000 Lincoln bondholders were defrauded and many investors lost their life savings. The substantial political contributions Keating had made to each of the senators, totaling $1.3 million, attracted considerable public and media attention. After a lengthy investigation, the Senate Ethics Committee determined in 1991 that Cranston, DeConcini, and Riegle had substantially and improperly interfered with the FHLBB’s investigation of Lincoln Savings, with Cranston receiving a formal reprimand. Senators Glenn and McCain were cleared of having acted improperly but were criticized for having exercised “poor judgment”.

All five senators served out their terms. Only Glenn and McCain ran for re-election, and they both retained their seats. McCain would go on to run for President of the United States twice, including being the Republican Party nominee in 2008.

Like I said, it wasn’t all perp walks. A number of hands were slapped. And for them, that was that. (Another of the big players was GHW Bush’s son Neil Bush. Big play-ah.)

But no one smoked any weed, so . . .

7 responses to “Not Eric Holder again! By the way, I thought corporations were people . . .

  1. Funny, most people hate Holder over Fast & Furious whereas you despise him because he could change the laws and arrest people who had committed no actual crimes.

    Yep. What they did might have been regulatory violations, but they stayed inside the limits of the law, leaving little in the way of options in what to do with them.

    And that’s part of the problem with government regulations. The more specific and expansive they are, the easier it is for those with attorneys on staff to find way around them…when THEY didn’t write the regulations in the first place.

    …And the government REALLY didn’t want public court cases where the defendants would have RIGHTLY said that the government aided and abetted the creation of both the mortgage bubble and the crash by their own regulations which coerced companies into creating, selling, and investing in mortgage-backed derivatives in their 1st place.


  2. Too big to fail, too rich to be punished.


  3. This is one big confusing mess to me. I agree with jonolan that Congress was complicit with the mortgage industry in that they failed to regulate properly and encouraged loose standards for mortgage qualification.

    I agree with you, Moe, that crimes were committed and people should have gone to jail. The one factor about foreclosures that sticks in my memory was reading about the wholesale false signing of mortgage documents by unqualified people and certifications of review that were outright lies. Such actions cost homeowners and taxpayers dearly and should have, as you say, been viewed far more severely than puffing marijuana. And I will go farther – Obama must share some of this blame. After all, does not the President determine policy for the AG?

    This is not new of course. It is the “revolving door” problem wherein the industries to be regulated supply the regulators who, after “serving” for a few years then return to the industry and benefit from their own laxity. I wish I knew how to fix it.


    • Congress’ culpability goes beyond a failure to regulate properly and encouraged loose standards for mortgage qualification. First they essentially demanded those loose standards for mortgage qualification for the sake of increasing minority home ownership. Then they, in the course of regulating banks’ liquidity, made mortgage-backed securities the “best” investment by only counting them $0.80 : $1:00 for purposes of non-liquid assets.

      As for the alse signing of mortgage documents by unqualified people and certifications of review that were outright lies – I think you’d find that almost all of that was done by third-party firms as opposed to by the banks themselves. Banks and mortgage firm outsource most of that work.


      • @jonolan,

        You said,

        “. . . I think you’d find that almost all of that was done by third-party firms as opposed to by the banks themselves. Banks and mortgage firm outsource most of that work.”

        Seems to me that outsourcing that work would not relieve the bank or mortgage firm of responsibility for supervising, monitoring and approving the result. Otherwise, any company could escape all culpability by doing just that. If that’s the way it works, it’s rotten.


        • It’s the way it works. It’s generally referred to as “deferring risk” and the clients normally only do minimal checking of the results – as long as the results look OK at face value – until such time as a provider’s results prove to be flawed in some manner. Even then, the normal course of action is to just change providers.

          And yes, from a legal standpoint, i.e., criminal charges, it relieves the client of responsibility for supervising, monitoring and approving the result…unless it’s considered patently obvious that the work was flawed at face value.


  4. The outrage on the Obama administration’s hypocrisies is admirable , but extremely late . This group who bashed corporations for four years is now planning a big inaugural celebration . Guess how they are planning to pay for it ? Corporations were barred from contributing the first time around, but not now . I hope these investments in goodwill, pay off . Get it ?

    On Friday the Federal election committee fined the 2008 Obama campaign $ 375,000 for a reporting violation . Yes, now that it does not matter, , , ,


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