Billions in damage, but no charges: How U.S. banks pay for protection


A series of banking scandals have wreaked financial havoc since 2008, without any criminal charges to big bank executives. Why? Follow the money.







By Declan HillSpecial to the Star

The list is long and shameful.

The Wachovia Bank helped launder hundreds of millions for Mexican drug cartels.

Wells Fargo illegally created nearly two million fake accounts and then charged customers service fees for them.

Barclay’s Bank executives manipulated and fixed international interest rates for its own profits.

The U.S. operations of Deutsche Bank created over one billion dollars in fake mortgages.

HSBC was, according to the U.S. Department of Justice, the “preferred financial institution for drug cartels and money launderers” for international terrorist groups. It also implemented a sophisticated scheme that helped end-run sanctions on Iran, Sudan and North Korea.

Countrywide Mortgage helped create a widespread system of junk mortgages.

Citigroup misrepresented billions in toxic loans and mortgages to customers and the U.S. government.



Those last two led to the Great Recession of 2008 that caused, according to the U.S. Treasury Department, $19.2 trillion (U.S.) in damage to the American economy.


All these activities have been admitted to. Some banks have paid billions in fines. Yet not a single big bank executive has been charged, arrested or convicted of any crime.


In fact, many are either still in charge or have retired with millions in golden parachutes packages. Two — Robert Rubin of Citigroup and John Stumpf of Wells Fargo — left with payouts of more than $120 million.


Everett Stern, a former HSBC employee turned whistleblower, thinks he knows why.


The banking and financial industry is the leading financial contributor in this election. Hands down. Banking has the most to lose,” said Stern in an interview. “So they are trying to buy as many politicians as possible. The banks are very smart. They know that if they get their voices heard in Washington and they buy the politicians they’ll be OK.”


Stern, who is running for the Senate in Pennsylvania as an independent, is backed by data gathered by Washington-based group which tracks political donations. Their figures show that the financial industry contributed more than $912 million to candidates in the last five years, making it the No. 1 contributor to political campaigns in the United States.


Stern thinks the real problem is who gets the money:


The people on the Senate bank financing committee are the main targets of the banks — because they’re the ones who have the powers to make the decisions to be able to influence the regulatory environment. They are the ones who determine that the bankers will go to jail if they do something wrong.”


Lawrence Lessig, a Harvard professor who specializes in the study of corruption and had a quixotic run for the 2016 Democratic presidential candidacy, said in an interview with the Star, “This is business as usual. It is deeply corrupt, but it’s not criminal. This is why the system needs to change.”


The regulation of the American financial system is a series of shifting parts that includes the Federal Reserve, Treasury and several other agencies. The Senate is supposed to oversee this complicated machinery through the 22-member banking committee.


The American system is made deliberately to have a number of overlapping veto points,” Lessig said. “So all (the banks) have to do is capture one of those veto points and they can make sure that nothing gets into legislation. In fact, control over a veto point gives tremendous power over questions of staffing and personnel as well.”


Senator Patrick Toomey, the Republican Senator for Pennsylvania and one of Stern’s opponents this election, disagrees. He describes Wall Street regulation “as a disaster.”


Toomey, a former banker, has fought hard to dismantle the Consumer Financial Protection Bureau (CFPB), the agency that discovered the fraudulent practices at Wells Fargo. Toomey calls the CFDB an “ill-conceived and badly governed entity that is not accountable to anyone.”


Toomey, a member of the banking committee, has received $4.8 million from the banks that the committee oversees. They are his largest campaign contributors.



  (Matt Rourke / The Associated Press)  


Toomey needs all the money he can get. The race in Pennsylvania against the Democratic challenger Katie McGinty is the most expensive Senate election in American history — Toomey’s seat and possible Republican control of the Senate is at risk — as more than $140 million has been poured into the contest.


When Stern discovered that Toomey was accepting money from HSBC, he decided to run against him.


Stern doesn’t think he has a chance, his polling numbers are about 2 per cent, but he is undaunted.


I am running to make a significant difference and to send a message that we are not going to be sold out any more . . . It is absolutely crazy that Senator Toomey can sit on the Senate Bank Finance Committee and take money from a bank that is under investigation. That is not justice.”


Stern’s conversion started when he joined the compliance department of HSBC.