In HSBC’s settlement with the U.S. Government, the bank has to pay $1.9 billion—about half a quarter’s profit—but avoids criminal charges. The New York Times quotes government officials who said they were hesitant to indict the bank because formal charges could mean bankruptcy, which in turn could roil the financial system itself owing to the bank being too big to fail. That is to say, one of the advantages of being TBTF is apparently that of effective immunity from criminal charges.
Of course, the prospect of bankruptcy could have been a red herring. Even if the bank would have gone bankrupt under the weight of criminal guilt and penalties, particular employees could still have been charged with having laundered money on behalf of Mexican drug lords and the Iranian government. Indeed, if criminal guilt cannot apply to an association rather than its members, it makes particular sense to prosecute human rather than artificial persons. According to Jimmy Gurulé, a former assistant U.S. Attorney General and former Undersecretary for Enforcement for the U.S. Treasury Department, the message sent by the dearth of prosecutions is, “if you want to engage in money laundering, make sure you're doing it within the context of your employment at a bank. And don't go small. Do it on a very large scale, and you won't get prosecuted." It is as though Max Weber’s ideal of bureaucracy, wherein the particular identity of an office’s occupant is not relevant, were translated into a “How to Beat the Rap by Doing Your Dirty Work at Work.” This may be a variant on “How to Win Friends and Influence People,” at least in banking circles that are above criminal law.
In fact, the lack of prosecutions against particular bankers at the bank is “essentially telling the executives in these institutions crime pays," Neil Barofsky, former Special Inspector General for the Troubled Asset Relief Program, told CNN. "Go ahead, do whatever you want to do, enjoy your profits, and the worst thing that happens, well, you have some fines that really make up a couple of weeks of profits that you lose." Of course, the fines come out of the banks rather than necessarily from what the bankers take home. In short, the message in the settlement may be that crime pays after all.
Mark Gongloff, “Obama Administration Essentially Admits That Some Banks Are Too Big To Jail, Which Is Troubling,” The Huffington Post, December 11, 2012.