Published CommPro.biz 2014.04.08

Too Big To Manage, Not Too Big To Fail

In an effort to forestall another “Too Big Too Fail” recession, our Federal Reserve established the so-called Stress-Tests. The Fed looks at a number of aspects of a bank’s operations and determines its potential to go belly-up, requiring another taxpayer bailout, even triggering another recession. Frankly, none of the monster banks are stable. They engage in what would be illegal gambling except for the exemption the Congress gave them to label risky behavior as “Investments.” The eight largest banks have all been told to beef up; to add close to $70 billion in fresh capital.

The latest stress-test dealt a blow to Citicorp. The sprawling giant failed for the second time in two years. The last stress-test failure in 2012 led to a change in leadership, unseating the CEO. This is the second blow Citi has suffered in recent months; in February its Mexican operation was hit with a $400 million fraud. Basically the Fed found that Citi is out of control, not just too big to fail, but too big to manage. It’s clearly time to break up Citi’s operations; it’s time for Citi to become a bank again.

It’s obviously time for all the monster banks to break up their uncontrollable global operations. They’re all clearly too big to manage. When banks count their Vice Presidents by the tens of thousands, that alone should indicate that the same conditions that led to the breakup of the monster banks of the day in the 1930s are in place again today.  It’s also apparent that these behemoths serve no real purpose in our society.

Quite the opposite, the monster banks disrupt the banking sector. Aside from the role they play in manipulating interest rates and other hanky-panky, they make it more than difficult for our community banks. Take credit cards for instance. With the revenue from their legalized gambling operations, they can make offers that a legitimate community bank cannot match. They suck off the checking and savings accounts as well.

But unlike the community banks they don’t use the funds harvested from these sources to provide small business loans. They pour this cash into risky gambling ventures with no social benefit. That leaves the small businesses that create most of the new jobs in our economy starved for operating cash and our economy the worse for it. In addition to Citi, the Fed failed three international banks with operations in the United States including British giant HSBC which our Justice Department considered too big to jail when they were exposed as facilitating international criminal enterprises.

There are a host of reasons why the monster banks should become a thing of the past. Problem is they pour cash into the pockets of our legislators and thwart any effort to restrict or control them. Arrogant CEOs like Chase über kommandant Jamie Dimon strut and lecture our Congressional leaders, flashing cuff links with the Presidential Seal. Those sent to take care of the people’s business are instead increasingly beholden to those with the cash to dictate to them, among others the monster banks.

 
"Am I wrong?"--"Am I crazy?"

"What do you think?"

"Do you agree?"

Published in CommPRO.biz 2013.06.26

BofA Told to Lie

 

When an entire sector of our economy -a crucial sector- is handed “Get Out of Jail Free” cards by our federal government, we should not be surprised when they run off the rails. We are talking about the monster, too-big-to-fail banks. It is more than surprising, it’s a miracle that it isn’t any worse than it is. The Department of Justice (DOJ) and its head, Eric Holder, the highest ranking law enforcement officer in the USA, has decided in the case of these banks that he will not enforce the law. He has repeatedly given the monster banks a pass. His rationale is that jailing top banking officials will destabilize the banks and our economy. Shows you how precious little Holder knows about business.

We have the major banks running amuck, fixing interest rates, laundering money for drug cartels and dictators, playing fast and loose with mortgages, ripping off consumers right and left and anything else that comes to their evil little minds. The latest instance is playing out in a Federal Courtroom in Boston where former Bank of America (BofA) workers are lined up to blow the whistle on the warped sickies running this bank. A bank that owes its very existence to the nearly $50 billion we taxpayers handed them to literally keep them afloat following the economic collapse they helped trigger.

In sworn statements BofA expats detail the bank’s efforts to squeeze every dime out of homeowners struggling to hang on to their homes. Bonuses to meet their foreclosure quotas, gift cards, all kinds of incentives to lie and cover up misdeeds designed to line the bank’s pockets with fees and interest before crushing those they should have been helping. And why not? If you get caught and have to pay a fine, it’s peanuts in comparison to the bucks pouring into the bank’s coffers. Just another cost of doing business.

This is not going to stop until we start charging the top executives of these banks and they face jail - that’s what it’s going to take. Attorney General Holder may be a fine lawyer but he clearly doesn’t know squat about business. Executives who allow the kind of behavior that we’ve seen at BofA, HSBC, Chase and the other big banks are lousy business people and lousy leaders. There are lots of honest people waiting in the ranks of these banks, ready and able to lead and build on a proven ethical foundation to produce happy customers. And in case you haven’t noticed, happy customers produce higher profits.

We do need to remove the temptation that allows banks to speculate with their customers’ deposits instead of investing them in our economy. We need the so-called Volker Rule. And we need to break up the monster banks. Take them out of the too-big-to-fail league. All the stuff that the big bankers little helpers’ on “K” Street managed to lobby out of the laws that protected us against bad bankers for decades. However, the DOJ’s first order of business should be to level criminal charges against these arrogant, ignorant punks who have no place leading any business, let alone one in the financial heart of the world economy.

Published in CommPro.biz 2013.04.25

 

HSBC Scot Free?

In study after study there is nothing to support the idea that “C” Suite occupants are irreplaceable. There’s an occasional example of a corporate leader’s departure negatively impacting a company’s performance: Steve Jobs’s voluntary ten-year absence from Apple left the company floundering; the jury is out at this point following his death in the fall of 2011 but the company is certainly not going to collapse. However, in all but a few cases there is an able individual in the wings ready to take over.

That makes a Department of Justice decision to give HSBC a get-out-of-jail-free card so outrageous. Listen to Attorney General Eric Holder earlier this month (2013.03.08) before a Senate Committee: "I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute -- if we do bring a criminal charge -- it will have a negative impact on the national economy, perhaps even the world economy," How dumb is that? What an insult to the tens of thousands of honest HSBC people to imagine that there are not lots of capable executives at HSBC who could step into the shoes of the boneheads who have turned an international financial giant into a gigantic criminal enterprise.

Let’s review: HSBC laundered carloads of money for the Sinaloa Drug Cartel, who are reported to have murdered thousands of people. HSBC created shams to help North Korea, Iran and others beat sanctions. HSBC financed Al Qaeda and a wide range of terrorist organizations along with mobsters in Russia, and they provided good old tax cheats a place to stash their earnings. That’s just a smattering of the flat-out criminal activity at HSBC. And the DOJ is letting them get away with it? Just have coffee in the same coffee shop as a terrorist and you’ll be grilled by the FBI. And HSBC gets a pass? Unbelievable!

Where does Holder think the “indications” of worldwide economic collapse if we jail these crooks is coming from? From the same HSBC lobbyists who pour bucks into the pockets of members of the Congress. Fortunately there are a few on the hill who are willing to stand up to these crooks, Carl Levin and Elizabeth Warren among others. Still, one estimate of support in the Senate for a break-up of the monster banks sees fewer than forty votes. Can you imagine how few members of the House would support such an action?

Everyone knows that’s what’s needed. The Dallas Fed chairman and at least one other Fed Board member have documented the need to break up the too-big-to-fail banks. These banks are the real threat to the world’s economic health. And until we treat criminal banksters for what they are, crooks, and put them in jail where crooks belong, they are going to keep right on breaking the law and risking another crash with their roulette wheel style of banking. Why not, when the top law enforcement officer in the United States gives them a pass?

Published 2013.02.22 in CommPRO.biz

3,800 to Zero
 
Following the Savings & Loan Crisis a couple decades ago, roughly 3,800 bank executives were jailed. The more severe crisis we are slogging though, has for all intents and purposes, produced zero convictions, no jail time for the Wall Street executives who triggered it. You may have heard that one of three financial rating agencies that awarded AAA ratings to the toxic mortgage packages the big banks referred to as “Crap,” Standard & Poor’s, faces $5 billion in Securities Exchange Commission (SEC) fines. However, not one S&P executive faces prosecution.

The appalling failure of federal and state entities to hold responsible those who threw us into the most damaging recession in seven decades is shameful. In reviewing the litany of excuses offered for this travesty, this much is clear: it is difficult to prove fraud. And, George W. Bush’s Treasury Secretary Hank Paulson created a bailout atmosphere seemingly designed for the ethically challenged monster banks. Our leaders, Treasury Secretary Jack Lew, Attorney General Holder, and the President himself, can’t seem to deal with the legal challenges. It’s a situation crying out for creativity.
 
Al Capone, whose criminal “Creds” ran from hooch to hookers with lots of killings thrown in, laughed in the faces of the authorities just as the bankers have been laughing since the bailout. The banks sucked up the taxpayers’ bucks in billion dollar gasps, like the dying beasts they were. Once they were on sound footing, instead of using our money to help the economy, they went right back to the same crazy risky stuff that caused the recession. And why not? They know they can stick the taxpayers with their losses. When the authorities couldn’t pin Capone’s criminal activities on him they got creative and tried him for tax evasion, netting Capone 11 years in Alcatraz.
 
Senator Carl Levin watched Goldman Sachs CEO, Lloyd Blankfein, smirk his way through testimony before his Senate Committee and then turned his findings over to the Justice Department. Levin, a Harvard Law graduate and experienced prosecutor, was clearly disturbed when Justice failed to take action. The DOJ also declined to prosecute egregious criminal behavior on the part of HSBC, citing a fear that to do so might take the bank down and threaten our economy.
 
It’s time for creativity. The Supreme Court says corporations are people, so let’s prosecute their living parts. Let’s charge top executives and boards of directors who know –or have a fiduciary responsibility to know– what their corporation is up to. Sending the Board and the “C” Suite off to the slammer is not going to sink the ship. One thing we know for sure: there are lots of topnotch managers who could take over and probably do a better job than those they replace, especially when replacing the nitwits who green-lighted the HSBC mess. Unlike a massive fine that becomes a “Cost of Doing Business,” the prospect of a jail term should put a halt to the greed-fueled behavior all too common in our banking sector.

My 2012 Top Ten 

Business Ethics Milestones

This year as every year almost everyone and almost every business strives and succeeds to maintain the highest ethical standards. It’s our nature and we know that our most precious asset is our reputation. After all, who wants to do business with a crook? It is, however, a struggle; and it’s too easy to take that first little step over the line onto the slippery slope. Of course there are those who seem ethically challenged. They spend a lot of time and treasure scheming and even more trying to cover their tracks. Ultimately they end up at the bottom of the slope, way past ethics into criminal territory. Most of this year’s milestones fall into the latter category, but there are some outstanding rays of sunshine.

#10 Let’s start out with some good news. A nationwide research study by Satmetrix, a West Coast provider of customer experience software, measured the attitudes of 30,000 consumers. Their findings reinforce the ethical business model’s value. It’s no surprise that companies boasting a long history of ethical standards top the list. Wegmans, Costco, Apple, Jet Blue, American Express, Virgin America, Amazon, Lowes, Google, all the usual suspects lead when it comes to doing the right thing. And guess what? They are leaders when you check their bottom line.

#9 There’s no such glow when you look at a few of our wealthiest Americans and biggest financial institutions; you get more of a Greasy Sleazy Feeling. They think nothing of turning our commodity markets into gambling halls, manipulating the price of food and fuel. Markets designed to support commodity producers have become a playpen for those with more money than morals. There’s a cure: limit commodity purchases to end users. Good for producers, good for end users, good for consumers, good for America.

#8 The ethical cesspool at the center of the media colossus Rupert Murdoch spawned on London’s Fleet Street, is beginning to suck him into its vortex. Unfortunately, it’s spread beyond his native Australia and Great Britain; it has spilled onto our shores. Murdoch became an American citizen so he could legally own broadcast properties here. He bought a couple smarmy newspapers like his British rags. He has also taken over and is twisting the once the once well-regarded Wall Street Journal. His big bucks come from broadcast holdings; satellite operations in Asia and Great Britain, cable outlets here. And then there’s his production arm producing television programs and motion pictures. Murdoch lunged over a line that most media tend to avoid, plunging into politics, even attempting to pick out his own presidential candidate. That kind of activity is common in Great Britain, not so much on this side of the pond. It’s especially disturbing when practiced by Scum-Lord Rupert Murdoch.

#7 Big Pharma's Big Con. The real cost of bringing a new drug to market averages $90 million a pop; a lot of money but a fraction of the$1.3 billion dollars they claim. Unless of course you include marketing, that’s where the big bucks go: flooding doctors’ offices with materials and samples, even hiring them to pitch other docs on the newest, latest, slightly updated drug. Add in the avalanche of print and television advertising urging patients to pressure their doc. It all adds up to sky high drug prices. Prices protected by a law prohibiting the government from negotiating lower prices– all courtesy of Big Pharma’s friends in the Congress. It’s enough to make you sick.

# 6 When the lobbyists pushed through “The Commodity Futures Modernization Act” opening up Wall Street to gambling, they unleashed a chain of events that resulted in the collapse of the world economy eight years later. Wall Street began leaping one ethical barrier after another and today everyone but the bankers is suffering. Dodd-Frank is designed to rein in some of the worst of this. The bankers are fighting these sensible controls. Our economic future depends on how it works out.

#5 Foxconn, a Taiwanese company with operations in China and around the world, makes many of the electronic toys that fill our lives. A British newspaper report described the life of a 21-year-old woman working ninety hours a week for less than fifty dollars a month. They calculated that allowing for inflation that fifty bucks comes to, “about half the wage weavers earned in Liverpool and Manchester in 1805.” Ponder that ethical issue the next time you finger the electronic toys in your pocket.

#4 Little did we know that the HSBC slogan, “Bank as easily around the world as you do at home” was to be taken literally. That this British “too-big-to-fail” bank was laundering cash for Mexican Drug Lords, hiding funds from the IRS in far off India for wealthy Americans, providing US currency to a Middle Eastern bank said to be a source of terrorist funding, and generally thumbing their nose at American laws and regulators. The bank has been hit with a record $1.9 billion fine in the US. The $27.5 million Mexico hit them with last summer along with the legal fees they have run up brings the total over $2 billion. That sounds like a lot of cash until you compare it to their 2011 profit, nearly $17 billion, or to a bonus pool of more than $4 billion that the HSBC executives split up. And surprise, it looks like none of those big-wigs are facing jail. The $2 billion amounts to pocket change for HSBC, just another minor cost of doing business.

#3 “Income Inequality” is a really big deal in the minds of Americans. A Pew study found it to be our greatest source of tension. Two thirds of the respondents see the divide between the super rich and those on down the food chain as our major concern. Reinforcing that view, in a Bloomberg Global Poll more than 1,200 investors, analysts and traders say it harms the economy and harms growth. Why is nobody willing to do anything about it?

#2 How can we turn our backs on sexual abuse? The Church, College Athletics, The Boy Scouts, who knows where it will be found next? The abuse of our children by institutions we trust is horrific, to cover it up is unforgivable.

#1 The Gift of Life - 4,800 people died last year waiting for a kidney. There were nearly 100,000 waiting for one a few months ago. The numbers are similar across organ donation programs. How could that happen? Consider that the latest available annual highway death toll (2010) totaled 32,885 individuals, a tragic number. But most with healthy organs, it’s disgraceful that so few remember that should something fatal befall us, our organs could help others live. Every business, everywhere we gather, organ donation should be a primary focus. We can think of no higher moral and ethical goal than assuring that if we give up our lives, we give life to others.

A Cost of Doing Business

This OP-ED appeared originally in CommPRO.biz

Back in July the American operations of Britain’s largest bank, HSBC, were found to be riddled with nasty stuff like laundering cash for Mexican Drug Lords, hiding funds from the IRS in far off India for wealthy Americans, providing US currency to a Middle Eastern bank said to be a source of terrorist funding, and generally thumbing their nose at American laws and regulators.

HSBC is by no means the only banking institution taking this stance toward our laws. Several European and American banks have pretty much followed the same path. We’ve hauled them up in front of Congressional Committees. In the case of HSBC their top compliance officer fell on his sword and resigned during a Senate hearing. So there is no question they are sorry. The question may be, sorry for what, sorry they got caught?

This whole business came up again last week when HSBC announced that they added another $800 million -bringing the total to $1.5 billion- to funds set aside for the fines they expect to pay. HSBC CEO Stuart Gulliver is reported to have told those on a media conference call last week (2012.11.05): “We deeply regret what took place in the United States and Mexico; a number of people have left the bank and have had clawbacks against their compensation.” Really?

While that makes great press, you don’t have to be an international banker to see that a couple billion in fines is pocket change in comparison to the money to be made flaunting our laws. Or put it up against the quarterly pre-tax profit HSBC announced the same day, $5 billion, and that was below analysts’ expectations. What was the impact of all this bad news? More fines? Only $5 billion? One bad day on the London Market; HSBC’s shares fell 1.3%. Big deal. Big nothing for them, these fines are no more than a cost of doing business. 

It’s going to take more than fines to deal with these out-of-control, profit mad international and American banks. This kind of behavior reflects the corporate culture emanating from the top. Until those who head these organizations are called to task, nothing will change. Criminal charges against the CEOs and other top executives, however, will put a stop to these practices. After all, if they choose to defy our laws, fund drug lords, terrorists, tax dodgers and other low life types, they should face the same levels of punishment as the scum they are funding. 

Ethical bankers who work to serve their customers and communities make up the majority of our banking sector. They shouldn’t have to compete with banks that do not follow that model. Banking is too important to be left to those looking for a fast buck anywhere they can find it. There are lots of good people toiling at HSBC and all the other banks big and small. In a few cases their leaders have deserted and betrayed them. It’s time to call those leaders to task. It’s time to return ethics to the forefront; to return ethics to the Board Room. A goal that leads to a more profitable enterprise at the end of the day. And a much nicer day along the way.

Iran? Really?

Hearings scheduled for this week (2012.08.15) by the NY State Department of Financial Services will examine alleged money laundering on behalf of Iran by a British bank, Standard Chartered. They are accused of using their US Branch to clean up some 60,000 transactions totaling $250 billion, a quarter trillion dollars for Iranian customers.

The seriously damning evidence seems to come from Standard Chartered itself. Published reports have its CEO responsible for US operations warning that the Iranian deals could, “cause very serious or even catastrophic reputational damage to the group.” His bosses in London replied, “Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”

But even that isn’t the worst of it. The bank is alleged to have a manual detailing how to automatically cover up the illegal transactions. They even devised a fancy code name for the scam, “Project Gazelle.” When sanctions were imposed during the Clinton administration, the bank is alleged to have set up a plan to dodge the restrictions and to have warned that this scheme must not be sent to the United States to prevent prosecution.

Standard Chartered has, of course, brushed off the charges out of hand, a course hard to understand when their own records show that they were well aware that what they were doing was illegal all the way back to the mid-nineties when the United States first imposed sanctions on Iran. That would seem to put the bank in the position of deliberately breaking the law. And it wasn’t just our sanctions on Iran. Standard Chartered is said to have routinely ignored sanctions on Libya, Myanmar, the Sudan and any others it could make a buck from. Reportedly the FBI has an ongoing investigation into this bank.  

Off shore banks with operations in the United States seem to feel that they can ignore our rules, and they can, just not while they are doing business here. In the last few years our laws regarding sanctions against doing business with Iran and other nations have snared a batch of these banks. Typically they walk with a fine that amounts to a slap on the wrist. That seems to have emboldened them to push the limits more and more until we are looking at wide ranging nasty stuff such as the alleged dealings with criminal organizations by HSBC.

It’s time to take the gloves off; to go after the folks running these banks. We need to treat them as the criminals they are. We need to kick these foreign banks out of the country if they don’t abide by our laws. The arrogant response of the Standard Chartered executives in London to their New York folks’ red flag, makes it clear that nothing is going to change over there. That’s reason enough to give them the boot. We have enough arrogant bankers in the United States, we don’t need to import any more from London.

HSBC – 

Banking Around The World

Little did we know that the HSBC slogan, “Bank as easily around the world as you do at home” was to be taken literally. That terrorists, drug cartels, even ordinary crooks and other slimy types could take advantage of the HSBC operations in the United States to convert their holdings to spanking new American dollar bills for use anywhere that currency is accepted – like everywhere!

Al Rajhi Bank in Saudi Arabia, reportedly a favorite of various terrorists, has also been a favorite of HSBC. Al Rajhi is said to have been the bank of choice for some of the 9/11 hijackers. This bank also handles funds for the International Islamic Relief Organization (IIRO) considered a funder of terrorist activities and a source of support for suicide bombers. HSBC was happy to stock up Al Rajhi with Indian rupees. Hmmmm? Rupees perhaps that financed terrorist attacks in Mumbai?

Investigators uncovered information indicating that HSBC green-lighted the movement of billions in shady dollars into the United States from Mexico, Saudi Arabia etc., etc., etc., without the kind of oversight the law and common sense dictates. 

It would appear that HSBC engages in every shady aspect of banking that one could imagine. Laundering money for terrorists, providing currency du jure no matter where the bad guys want to blow something up. Giving the drug cartels lots of US dollars to enjoy the fruits of their murderous ways. Even Russian organized crime lords found HSBC to be a great help in laundering their cash.

Of course HSBC is into rigging LIBOR rates big time, impacting our credit cards, mortgages and literally every form of bank related credit. Don’t forget their role in rigging municipal bond auctions adding to the cost of public infrastructure from schools, to highways, to sewers, not to mention the taxes that pay off those bonds.

This is far beyond ethics. Like the crooks they serve, they should be prosecuted. And not just the little guys who make the dirty deals and rig the rates, but the guys at the top, the people who created this culture. It’s not organized crime without a “Boss” –or a “Bankster” as the Economist famously labeled them– calling the shots. HSBC executives, the folks at the top –gangsters with a “B”– enabled this massive criminal enterprise. And we all know where organized crime leaders belong, in the slammer. We’ll see if law enforcement authorities around the world will bring them to justice.