It is no longer a question of whether Wall Street and the rest of the international finance system is corrupt. The question now is merely a matter of degree: how repellently abhorrent, how pervasively criminal are the too-big-to-fail bankers?
The world got a hint of the depth and breadth of big banking's crooked values when HSBC, Europe's largest bank, admitted that its North American division laundered Mexican drug money, did business with Middle Eastern banks with terrorist ties, and circumvented US sanctions against Iran.
And how did HSBC explain itself? With weasel words: "We will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect." Translation: "Oops, our bad."
Does anyone with their wits about them think that HSBC is an isolated case? If they do, they must be either registered Republicans or fundamentalist nut jobs who believe that regulation is the work of the devil.
Regulators may not be Satan's spawn, but they are a pathetically ineffective lot. Not only did they fail to prevent the subprime mortgage bubble that crashed the economy, many were active participants in the folly.
It should surprise no one that the US senators investigating HSBC found that regulators were on to at least some of HSBC's shenanigans years ago.
The problem is that each time HSBC was called on the carpet or sanctioned, the bank promised to mend it ways — and then proceeded with business as usual.
While the Justice Department has mounted a criminal investigation and HSBC is expected to pay a fine, do not expect any fundamental change, or any top executives to go to prison. Money talks and the big boys walk. If Washington were serious about policing the banks, it would prohibit HSBC from doing business in the US. But the only thing that Washington is serious about is campaign contributions.
Even more vexing than HSBC's wanton behavior is the unfolding international scandal about rigging something called LIBOR, which is the acronym for the London Interbank Offered Rate.
Simply put, LIBOR is what banks charge one another to borrow money. It may sound dreadfully dull, but it affects the rates charged for — among other things — credit cards, mortgages, and student loans.
LIBOR impacts more than consumer credit. It also helps determine the cost of corporate borrowing and thus affects the economy at large.
On a day-to-day basis, LIBOR has tremendous impact on financial derivatives, those wagers masquerading as investments that bankers, brokers, and hedge funds use to make — or lose —millions of dollars.
LIBOR is the world's most important interest rate. In one way or another, it influences $800 trillion worth of business. Repeat: $800 trillion.
It appears that, for at least five years, some of the world's largest banks had conspired to fix the rate.
Investigators in Japan, Switzerland, the European Union, Canada, the United Kingdom, and the US are investigating the LIBOR scam. It is shaping up to be the greatest financial scandal in world history.
London-based Barclay's has already admitted to UK and US regulators that it scammed LIBOR in order to boost its derivative trading. Barclay's top three executives have resigned, and the bank was hit with a half-billion-dollar fine.
