The $1.9 billion settlement agreed to by UK-based international bank HSBC for laundering terrorist and drug money was described by American authorities as a message.
Senator Carl Levin, who chaired in inquiry, said, ""The HSBC settlement sends a powerful wakeup call
to multinational banks about the consequences of disregarding their
anti-money laundering obligations."
A message was indeed sent, but in the other direction. The message -- a lesson that market skeptics like me learned long ago -- is that in a competitive market, somebody will always estimate that it is more lucrative to take the extreme position and take it.
No HSBC managers were charged as individuals and, indeed, while they are indecent human beings, what they did as business managers was -- by market standards -- acceptable, even commendable.
Markets are immoral. Not amoral. Climate is amoral. Hurricane Sandy did not target Manhattan. Markets are immoral. Their only goal is to increase profit. There are no limits as to how.
The market values HSBC at about $200 billion. The day the settlement was announced, the value of the shares rose more than half a percent -- about a billion dollars. So half the so-called fine was gained back by the shareholders in a few hours.
Some commentators who have been critical of the leniency of the settlement pointed out that the money came not from the managers but from the shareholders. But they're wrong.
I don't know how much additional profit HSBC generated by taking blood money, but when you add that to the approval of the market of the settlement, it is obvious that the shareholders came out ahead on the wrongdoing. I do not anticipate that any of them will feel obliged to disgorge their dirty money.
Since HSBC had already been caught twice before laundering money, there is no reason to think that it will not do it again. Laundering money makes money. The market approves.
Not only the market as an impersonal mechanism. The people who operate the market also approve. The demonstrated indecency of the HSBC managers will not harm their position as marketeers. No one in the banking business will decline to do business with them because they are immoral. Socially, none of them will be asked to resign from their clubs in London.
If it made money, then it was the right thing to do. The only thing that will get you frozen out is passing up an opportunity to take a profit.
If the market approves, it will happen. If the market thinks you are worth more to it dead than alive, it will arrange to have you killed.
"The people who operate the market also approve."
ReplyDeleteWhich people? All 7 billion of them?
A market is the aggregate sum of transactions. Nobody operates it, except of course for governments. So are you saying that governments approve?
If a government wants you dead, you will be. Just ask Obama's drone victims.
The international money-laundering market? Hardly 7 billion participate in that?
ReplyDeleteEven the international banking market, all in, has only a few hundred thousand participants. I, for one, do not participate. Just a bystander/victim.
In my view, a market is more than an aggregate of transactions. It is like the English Constitution or social mores: a system of (originally) unwritten rules and customs by which humans negotiate ways of behavior.
Latterly, of course, lots of the rules have been written down. I was not asked to participate in the writing, so I take no responsibility for the goodness of the results.
Madoff was an outstanding example of what financial markets consider permissible. Many people who dealt with Madoff understood he had to be cheating, although they were not sure how he was doing it. But almost all (the exceptions I know about can be counted on my thumbs) kept dealing with him.
The two who didn't had a kind of input into the unwritten rules. If there had been more like them, Madoff would have been excluded from the financial markets.