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Where Are the “Progressive” Democrats on Loretta Lynch’s HSBC Money Laundering Wrist Slap?

The progressive wing seems willing to buck the administration only on narrow issues.

Some Republican Senators are having a field day, and rightly so, over the fact that Obama’s attorney general nominee, Loretta Lynch, looks to have allowed bank giant HSBC, and more important, its executives and officers, off vastly too easy in a massive money-laundering and tax evasion scheme.

The background is that Lynch, as attorney for the Eastern District of New York, led the investigation of HSBC’s money laundering for drug dealers and other unsavory types that led to a $1.9 billion settlement in 2012. That deal was pilloried by both the right and left as being too lenient given the scale of HSBC’s misdeeds.

And now it turns out the great unwashed public was kept in the dark about another set of misdeeds, that of large-scale tax evasion for the wealthy, which Lynch was aware of when she was negotiating the money-laundering deal. From the Guardian:

Lynch negotiated a controversial settlement with HSBC in 2012, after the bank admitted to facilitating money-laundering by Mexican drug cartels and helping clients evade US sanctions.

Now there are questions over why she did not also pursue HSBC over evidence that its Swiss arm helped US taxpayers hide their assets.

The secret bank files – obtained and examined in detail this week in a series of reports by the Guardian, CBS 60 Minutes and other media outlets – reveal that HSBC’s Swiss arm colluded with some high net-worth individuals to hide their assets from tax authorities across the world.

The new data, leaked by a whistleblower, was obtained by French tax authorities and shared with the US government in 2010, raising questions over why the Department of Justice has yet to take action against HSBC in the US.

US government officials have told the Guardian that investigations by the DoJ’s tax division have been continuing for five years and criminal charges against HSBC or its bankers remain a possibility..

British, French and Spanish tax authorities have publicly disclosed the number of HSBC Swiss clients investigated as a result of the leak and the total sums recovered. In total, the three countries have recovered more than $825m from taxpayers who had not declared their assets in Geneva. However, in Washington, the IRS is refusing to disclose any information about investigations or recovered assets stemming from the leak.

If you think the DoJ was entertaining filing criminal charges, I have a bridge I’d like to sell you. The only reason there actually might be some prosecutions is solely as a result of the leak and the resultant media firestorm.

Keep in mind that the Republican opponents, Judiciary Committee chairman Chuck Grassley and David Vitter, both have a history of being tough on banking issues, so they have legitimate grounds for consternation. Grassley has put a hold on Loretta Lynch’s nomination. He and Vitter, who is in contact with the whistleblower, are planning to grill Lynch over what she knew about the tax evasion charges and when she became aware of it. Democratic senator and ranking Judiciary committee member Sherrod Brown has also said he is going to push the DoJ and the IRS for answers.

But what about Democratic Senators who were so upset about the wrist slap settlement in 2012? What of this supposed bold progressive wing that we are led to believe will rescue the Democratic party from its corporate sellout ways? Even with a safe target like HSBC, party tribalism apparently takes precedence over principle when a major Presidential nomination is in play. But mind you, no one expects this contretemps to derail Lynch getting voted in, since most Republicans deem her to be acceptable. But given a chance to move the Overton window in the direction of demanding something the American public overwhelmingly wants, prosecutions of bankers, key Democrats are trying to finesse being tough on HSBC without being tough on Lynch. Again from the Guardian:

Until now, Senate Democrats have been most outspoken over the revelations. The Republican chair of the Senate banking committee, Richard Shelby, from Alabama, declined to comment when pressed by the Guardian this week….

Elizabeth Warren, the Democratic senator who was most vocal in her opposition to the 2012 settlement with HSBC, also called on prosecutors to “come down hard” on the bank if the leaked data shows it colluded with US tax evaders. However, neither senator mentioned Lynch, amid concern on the Democratic side that the HSBC revelations could derail Lynch’s confirmation.

Jeff Merkley, a Democratic senator from Oregon, also called for tough action against HSBC over tax evasion, while steering clear of any reference to Lynch. “It is time to hold HSBC fully accountable under the law for its disturbing conduct,” Merkley said. “While criminal charges are obviously a matter to be settled in the judicial system, I strongly encourage prosecutors to mount the strongest possible charges rather than going for another slap on the wrist.”

What gives? The same logic of targeting bank executives, not banks, applies with administrative action in government agencies. It was on Lynch’s watch that the critical decision of how far to take the HSBC decision was made. Once she had made the deal, it was almost certain that staff were pulled off the case and tasked to other matters. It’s not realistic to hold the current DoJ accountable for a decision made by Lynch years ago.

If the Democrats want to regain the trust and ground they lost in the 2014 midterm debacle, they need to recognize the problem is how Obama has governed and start demanding higher standards from the party. That means going into opposition when the situation warrants it. Elizabeth Warren gained stature by fighting the Administration on the so-called Cromnibus bill and on Antonio Weiss. The way to move the party is to be willing to stand against it when its position is demonstrably wrong, which sadly is way too often, and inflict costs. The objective is not to win in every case but to exert influence and make the leadership think twice before taking expedient actions.

But so far, the much-touted progressive wing seems willing to buck the Administration only on comparatively narrow issues and mid-level appointments. Most important, both parties are still in the dark as to where the facts lie with Lynch and HSBC. Perhaps she has a cogent defense, but a head in the sand approach is no way to deal with a position this important. The Democratic bank critics should grill Lynch and be prepared to withhold support if her answers are evasive or confirm the worst suspicions about her being willing to go easy on powerful corporate miscreants.

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