Tell Mitt: Don't run campaign on drug money

Imagine if U.S. politicians took financial contributions skimmed from the ill-gotten gains of bloody Mexican drug cartels and terrorists.

Imagine further that those who profited off the drug gangs used their murder-tinged cash to lobby the U.S. Congress.

You don’t have to strain yourself, this is not some sordid fantasy concocted by Hollywood to horrify and entertain you. This is the reality created by Wall Street’s finest and our leading politicians.

The latest sorry chapter in Wall Street’s waltz with the drug-dealers is laid out in a report by the Senate Permanent Committee on Investigations. Officials of the British too big to fail bank HSBC acknowledged that despite repeated warnings, they failed to stop drug and terror-tainted deposits from moving through the bank.

According to the report, HSBC, one of the world’s largest banks with a strong U.S. presence, “exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering controls.”

In 2007 and 2008, the Senate committee found, HSBC moved $7 billion in bulk cash from Mexican to its U.S. operations, even though authorities warned that the money was proceeds from drug sales.

HSBC was doing a thriving business with well-known cash exchange businesses used by the drug cartels known as casas de cambio, despite repeat warnings that they were fronts. Years after other banks had cut them off, HSBC continued to do business with the casas de cambio.

Mexican drug cartels weren’t the only ones taking advantage of HSBC’s lax controls. Middle East bankers with links to Al Queda also found HSBC a hospitable environment in which to conduct business.

You might think that the authorities would have roast HSBC officials on a spit.

Far from it: in 2008, regulators rewarded HSBC with $3.5 billion from taxpayers in a backdoor bailout, in payments funneled to the bank’s U.S. subsidiary through AIG.

Now HSBC’s bankers have been humiliated at a public hearing and the company’s shareholders may be forced to pay as much as $1 billion in fines.

Still, from the bankers’ perspectives, you would have to say money laundering and bailouts have been very, very good to them. Even after they pay the fine, they’d have more than enough to pay for the $125,000 they’ve given to congressional candidates so far this election cycle, and the $5,700 they’ve doled out to Mitt Romney. The left-over laundered money will also help defray the costs of the $900,000 worth of lobbying the bank has done this year.

I’m confident now that the full extent of HSBC’s misdeeds has become known, Romney and the other politicians will want to have nothing to do with this dirty money and will be clamoring to give it to charity.

But just in case it slips their minds in the rush of doing the people’s business, we should help them out. Mitt can provide a good example by being the first to get rid of the drug and terror money.

 

 

 

Around the Web: Taking Reform Fight to the Streets

The Republicans apparently think it’s too soon to start debating Wall Street reform, and the Democrats didn’t seem to mind too much.

After all, their secret weapon is coming to town: The banker America loves to hate, Goldman-Sach’s Lloyd Blankfein, who will testify Tuesday before the Senate’s Permanent Subcommittee on Investigations.

But the political theater can’t conceal what’s really happening. The lobbyists are working overtime working to kill, dismember or water down legislation.

The public’s continuing frustration and rage over the on-going bailout and continuing disconnect between Wall Street and Main Street finds little expression in what passes for debate in D.C.

A handful of Democratic senators – Kaufman, Shaheen, Merkley, Brown, Sanders, Levin and Cantwell – are waging a battle for the party’s soul against a leadership and administration that wants only as much reform as will not offend Wall Street. Meanwhile, the Republican leadership postures and preens and preaches about how the Dems’ proposals will hurt Main Street while they try to woo Wall Street campaign donors away from the Democrats.

What we have been getting from the Obama administration are words of caution, from the president to top economic adviser Lawrence Summers.

The Fourteenth Banker suggests a disinvestment campaign like the one that brought pressure on South Africa.

There will also be demonstrations across the country all week to galvanize public support for reform.

Around the Web: Can WAMU be the Blue Cross of Financial Reform?

During the debate over health care reform, the public was galvanized by the disclosure of  outrageous insurance rate increases by Blue Cross.

It was that public outrage that finally got the healthcare legislation passed over Republican opposition.

Now Senate backers of  a strong overhaul of the financial system hope that televised hearings on the details of the reckless lending, incompetent management and multiple regulatory failures that sank the nation’s largest savings and loan will fuel support for financial reform in the face of relentless opposition from Wall Street.

The hearings got underway Tuesday in the Senate’s Permanent Subcommittee on Investigations, headed by Sen. Carl Levin,D-Michigan.

In strong contrast to hearings  held recently by the congressionally appointed committee to investigate the financial crisis, Levin’s opening hearing was tough, pointed and thorough. Levin said he intended for the hearings to serve as a case study for what happened at financial institutions during the meltdown. He compared WAMU’s selling and packaging of  high-risk option ARM and no-doc loans to dumping “pollutants into a river.”

Calling Washington Mutual’s former CEO Kerry Killinger “a forgotten villain of the financial crisis", Fortune’s Colin Barr sets the stage here. Business Week recounts the testimony here. CSPAN carried the hearings live they can be viewed here.

The star witnesses from WAMU were Killinger and former Chief Operating Officer Stephen Rotella. Killinger testified that WAMU was unfairly targeted by regulators because it not “too clubby to fail” as were larger financial institutions. Killinger insisted WAMU could have worked its way out of the crisis if regulators hadn’t eventually shut it down.

On Friday, we’ll hear from the regulators, who were well aware of WAMU’s questionable lending and securitization but continued to find that the savings and loan was financially sound.