World View: HSBC Holdings Admits to Criminal Money Laundering

This morning's key headlines from

  • 'Pervasively polluted' HSBC Holdings admits to criminal money-laundering
  • Do you remember Household Finance Corp?
  • Why was HBSC even investigated?
  • Possibly crucial battle is building in Damascus, Syria
  • Israel's government nears collapse over drafting of ultra-Orthodox Jews
  • Hillary Clinton appears to give Iran an ultimatum over nuclear weapons

'Pervasively polluted' HSBC Holdings admits to criminal money-laundering

A new criminal banking investigation is so bad that it's comparable in criminality to the Libor scandal. HSBC is the largest bank in Europe, and one of the largest in the world, with 7,200 offices in 80 countries, and 2011 profits of $22 billion. The U.S. affiliate, HBUS, has 470 branches across the country, with 4 million countries. HBUS provides thousands of banks with "U.S. dollar services," which mean services to move funds and exchange currencies around the world. 

The Senate Subcommittee On Investigations, led by Silent Generation Democrat Carl Levin, has been investigating HSBC as a "test case" for money-laundering violations, and the range of criminal acts is breathtaking, including the following:

  • HSBC laundered $7 billion in physical U.S. dollars from Mexico to the U.S. in 2007-8 alone, even though it was obvious to anyone who looked that it was drug cartel money. A lot of the money went through the Cayman Islands to avoid detection.
  • HSBC actively circumvented U.S. safeguards to block transactions involving terrorists and drug lords, and was able to launder $19.4 billion in 25,000 transactions with links to Iran.
  • HBUS provided U.S. dollars and banking services to Saudi banks supporting al-Qaeda after 9/11.

David Bagley, the head of compliance, testified before the Senate on Tuesday and announced that he was stepping down. He tried to spin the crimes as innocent mistakes and "lax controls," but there's no way that these actions were not intentional. This is the same as in the case of Barclays, where the release e-mail messages reveal a criminal culture of people willing to screw anyone for their own gain. According to Levin, "The culture at HSBC was pervasively polluted for a long time."

The Senate report also blames regulators for failing to investigate the obvious crimes going on. As I've written many times, Gen-X regulators have not only refused to investigate and prosecute even the most obvious financial crimes, they actually cooperate with banksters in continuing to defraud the public. One of the worst offenders was New York Insurance Superintendent Eric Dinallo who spent several months in 2008 helping the banks and "monoline" bond insurance companies to collude to commit fraud. 

Since HSBC is just a test case, it's very likely that other banks committed similar crimes. U.S. Senate and Sky News

Do you remember Household Finance Corp?

On February 9, 2007, I wrote about how mortgage-backed securities were collapsing in value because of bad subprime mortgage loans. ( "Rapid collapse of ABX index indicates that investors may be starting to panic.") Most pundits talk about the financial crisis beginning in 2008, but readers of my web site were aware that the crisis was already in full swing in February, 2007, with the collapse of the housing bubble. 

That article was triggered by a press release from Household Finance Corp., a venerable old American consumer credit firm that HSBC acquired in 2003, renamed HSBC Finance Corp. The press release said that they expected to have $1.75 billion in unanticipated bad debts, because so many people were defaulting on their subprime mortgages. Another major institution, New Century Financial Corporation, made a similar announcement at the same time.

Here's an excerpt from the press release that's almost hilarious to read today:

The impact of slowing house price growth is being reflected in accelerated delinquency trends across the US sub-prime mortgage market, particularly in the more recent loans, as the absence of equity appreciation is reducing refinancing options. Slower prepayment speeds are also highlighting the likely impact on delinquency of higher contractual payment obligations as adjustable rate mortgages reset over the next few years from their original lower rates.

In other words, the housing bubble was bursting, and a lot of people were delinquent or defaulting.

What's signficant about all this in retrospect is that we now know:

  • The real estate bubble was collapsing in early 2007.
  • The Gen-X financial engineers that had created the fraudulent mortgage-backed securities could now provably see that their models were wrong and their securities were fraudulent.
  • And yet, sales of these fraudulent securities SPED UP throughout 2007, because the Gen-X financial engineer criminals and their criminal Boomer bosses wanted to make as much money as possible before the whole system crashed.

In July, 2007, Citigroup’s chief executive, Charles O. Prince, said that he's still going full steam ahead with credit and leveraged deals. He said, "As long as the music is playing, you’ve got to get up and dance. We’re still dancing." Now we know that by "dancing," he meant that he was going to defraud as many people as possible while the music was still playing. 

Why was HBSC even investigated?

I've been writing for years about the overwhelming circumstantial evidence showing that crimes were committed by banksters in the early 2000s that led to the global financial disaster, which is far from over. And I've been repeatedly astonished that the regulators, led by Attorney General Eric Holder, adamantly refuse to investigate and prosecute these crimes, even when it's screamingly obvious that serious crimes have been committed. 

So I have to ask the same question that I asked in the case of Barclays and the Libor scandal: Why are these crimes being investigated and prosecuted now? What's changed?

And I come back to the same answer for HSBC as I did for Barclays. It's no coincidence that they're both British banks, and that the criminal activities were investigated by Americans. Eric Holder and other Washington politicians of both parties will not investigate Citibank or Bank of America because the politicians receive huge campaign contributions from these banks. But since HSBC and Barclays are British banks, it's far less likely that there's a campaign contribution connection. British regulators would never have investigated British banks on their own, until they were forced to do so by the Americans. But you can be sure that British regulators will get their revenge before too much longer.

Possibly crucial battle is building in Damascus, Syria

During the 16 months of fighting in Syria, the capital city Damascus has largely escaped the violence. But now a spokesman of the Free Syrian Army is saying that thousands of fighters have converged on Damascus for a final battle to "liberate Damascus." The forces of the Bashar al-Assad regime are using helicopter gunships to repel the rebels, but rebels are making unconfirmed claims that they's shot down an army helicopter on Tuesday with anti-aircraft weapons. Israel's army intelligence chief says that al-Assad is moving troops from the Golan Heights front line with Israel and redeploying them to Damascus. As this fighting has proceeded, a Turkish official said a Syrian brigadier general and several other military defectors were among 1,280 Syrians to have fled to Turkey overnight. Reuters Now is a good time to repeat that Syria is in a generational Awakening era, and so a crisis civil war is impossible at this time. If I were to guess, I would say that the most likely scenario is that at some point al-Assad will be forced to step down, and then the civil war will fizzle, despite analysts' predicts that it will continue even if al-Assad leaves. That could be one possible outcome of the current battle in Damascus. Once the civil war fizzles, U.N. envoy Kofi Annan can claim to have brought peace to the Mideast. 

Israel's government nears collapse over drafting of ultra-Orthodox Jews

Israel's government has increasingly been in crisis over military draft exemptions for ultra-Orthodox Jews and Israeli Arabs, as we reported two weeks ago. On Tuesday, Israel's government appeared close to collapse, after the Kadima party withdrew from the government coalition of prime minister Benjamin Netanyahu over a disagreement about the drafting of ultra-Orthodox Jews. Netanyahu submitted a compromise proposal on Tuesday, that was rejected by Kadima as "complete rubbish," leading to the breach. Attempts to create a new governing coalition are under way, but so far have not been successful. Haaretz

Hillary Clinton appears to give Iran an ultimatum over nuclear weapons

At a press conference in Israel on Monday evening, U.S. Secretary of State Hillary Clinton said that everyone prefers a diplomatic solution to the Iran crisis, but "We will use all elements of American power to prevent Iran from obtaining a nuclear weapon."

This was part of a prepared statement, and it appears to be an ultimatum. Until now, the Obama administration has never explicitly said that the U.S. would use military power to prevent Iran from obtaining a nuclear weapon. Jerusalem Pos

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