Financial reform not enough to abolish systemically threatening institutions
In July, the U.S. Senate Permanent Subcommittee on Investigations found that HSBC provided at least $1 billion to Rajhi Bank, a Saudi Arabian bank founded by an early supporter of the terrorist group al-Qaeda, the New York Times reports.
Jonathan Reiss, the managing director of Analytical Systems, said on Thursday that the financial reforms have not curtailed the "too big to fail" issue. He alleged that HSBC was able to avoid prosecution by holding the U.S. economy hostage, Huffington Post reports.
On Tuesday, Assistant Attorney General Lanny Breuer announced a nearly $2 billion settlement with HSBC for permitting money laundering by narcotics traffickers and sanctioned countries. Breuer said that the U.S. did not want to make a decision that would have major collateral consequences.
"In other words, HSBC was able to avoid prosecution by holding the US economy hostage," Reiss said, according to Huffington Post. "The same logic was used to justify the 2008-09 bailout programs that put trillions of dollars into megabanks and other huge institutions to stave off a depression."
Reiss referred to companies that are so complex and interconnected that they threaten the financial system as systemically threatening institutions.
"Unfortunately, the HSBC settlement shows that Dodd-Frank act has not done enough," Reiss said, according to Huffington Post. "We urgently need true reform to abolish systemically threatening institutions."