Why the US didn’t prosecute HSBC
Mark Gongloff is not a fan of the idea that corporations are people. Except, that is, when the corporation in question is HSBC: he’s extremely angry at the fact that the UK bank won’t face criminal prosecution as a result of its money-laundering shenanigans.
Gongloff’s take is pretty mainstream: the NYT editorial page said that the decision is “a dark day for the rule of law”, adding that “clearly, the government has bought into the notion that too big to fail is too big to jail”.
But here’s the thing: you can’t jail a bank, or any corporation; a criminal indictment of a corporation is a bit of a peculiar fish at the best of times. Even if the bank survived, which Gongloff thinks is possible but no one knows for sure, there would certainly be massive job losses — and we can be sure that somewhere between 99% and 100% of those job losses would fall on people who had absolutely nothing at all to do with the money laundering that HSBC was getting up to.
What’s more, it’s important to put HSBC’s crimes in context. The United States, in its role as global hegemon and guardian of the world’s only real reserve currency, has unapologetically taken the opportunity to use its economic power to push its geopolitical agenda. For instance, if you’re an Iranian business and you want to do business in dollars, the US is determined to make your life as difficult as possible. The US might have no jurisdiction over Iranian businesses, but it does have jurisdiction over nearly all the important banks in the world, since it’s impossible to be a global bank without having some kind of presence in the US. And — as Argentina is finding out right now in its court case against Elliott Associates — if you want to send dollars around the world, you basically have to send them through the USA.
To put it another way, the laws that HSBC broke were laws designed to bolster the international standing of the US relative to Iran and other countries: they were geopolitically motivated, and the intended target was not the international banking system, with which the State Department has no particular beef, but rather countries the State Department doesn’t like.
In general, the laws have had their intended effect: they have depressed commerce in the relevant countries. But after HSBC has been caught breaking the laws, is there really any point in then pursuing a scorched-earth criminal prosecution against the bank? Remember, the bank was not the real target of the laws in the first place — and what HSBC did was perfectly legal in, say, the UK.
The US certainly has the ability to criminally prosecute HSBC. But doing so would not particularly hurt Iran or any of America’s other state enemies. And the laws which HSBC broke were not laws against bad banking, they were laws against bad states.
Or, to put it another way: the US is the most powerful sovereign nation on the planet. With a flick of its Justice Department finger, it could wipe a globe-spanning bank off the face of the financial system. It has truly awesome power. And every single bank in America is well aware of just how much power the US has in this regard. The question isn’t whether to use that power, it’s why. To do so would be bullying, and capricious, and would punish thousands of innocent individuals, and would destroy hundreds of billions of dollars of value, all for the purpose of nothing much in particular. Just because the US can prosecute HSBC doesn’t mean that it should prosecute HSBC. And sometimes, forbearance isn’t a sign of weakness, it’s a sign of maturity.
Update: Contra EJ Fagan, this is not an argument against prosecuting individuals at HSBC who broke the law. And in the comments, a lot of people are making the point that HSBC’s crimes centered not on Iran but rather on Mexican drug cartels; again, the laws broken are all part of the US war on drugs. The question here is: do you destroy a bank as collateral damage in that war?