Criminal Banks: Headed in the Wrong Direction

America's large banks and investment houses have become so criminal and so powerful that they believe, with some justification, that they are above the law. They have a point because we have allowed them to be too-big-to-fail and too-big-to-jail.

The bankers and financiers, the people who create, buy and sell money, are brazen in their contempt for the rest of the economy and in the belief in their own importance. Again, they have a point. Politically, as Sen. Durbin said recently: "the banks are the most powerful lobby on Capitol Hill. They frankly own the place." Economically, the financial sector's share of the profits of all businesses has gone from 16% in the 1970s to 41% in the past decade.

These bankers are the richest and most powerful group in the country. They are also part of a community where cheating , bribery and collusion are praiseworthy behavior.

The list of crimes that the bankers have committed keeps getting more outrageous and no one does anything. Our politicians are cowed by fear of losing large campaign donations. We are cowed by the sheer size of the money involved and the claim by the industry that finance is too complicated for the nonprofessional to understand.

That is arrogant nonsense. All of their so-called complexity boils down to the price of renting money. If they can't explain it so you can understand it then either they don't understand it or it doesn't make sense.

They game the system blatantly. In the midst of the financial crisis, Hank Paulson, one of their own and US Treasury Secretary, handed them hundreds of billions of dollars without asking, knowing or caring what they were going to do with it. More recently, the Federal Reserve system' s Quantitative Easing (QE1 and QE2) allowed the banks to borrow hundreds of billions of dollars from the Fed at near zero interest rates. They then put it back in the Federal Reserve at a higher interest rate. The spread was sheer giveaway.

Real criminality is on the docket right now. Every village and town, hospital and fire house in America borrows money to build sewers, schools and other infrastructure. This municipal bond market is worth $3.7 trillion. In the time between borrowing the money and spending it, sometimes years, prudent local officials put the money at interest, based on the advice of professional brokers.

Those brokers were, however, colluding with the biggest financial players on Wall Street, including GE, J.P. Morgan, Bank of America and Wachovia. They charged above market rates to borrow the money and then paid below-market rates when the money was invested through them. These firms thereby stole billions of dollars from thousands of American local governments across the 50 states.

Another current criminal conspiracy concerns an interest rate called LIBOR (London Inter-Bank Offered Rate), which is supposed to be an honest average of the world's competitive interest rates. Besides business loans and currency trades, it affects or sets the interest rate that consumers pay on car loans, credit cards, student loans and mortgages. This is real. The payment on the variable rate mortgage I took out on my house rose or fell with LIBOR. The banks of the world have just now been caught manipulating the LIBOR – with Barclays Bank in the lead.

Barclays is being fined $450 million that is to be paid to the US and UK financial regulators. Having been caught stealing billions of dollars, the four top officers at Barclays bank are so penitent as to forego their bonuses this year. This week, the president of Barclays resigned. It should be noted that the British take their scandals more seriously than we do. People could go to jail there.

Here in America, we fine banks but we do not put bankers in jail. Bernie Madoff was a lone wolf. The sewer in Jefferson County Alabama is a clear example. Amid fraud and bribery, a $1 billion sewer turned into a $3 billion debt and the largest municipal bankruptcy in history. Local politicians have been convicted and jailed for taking bribes. No bankers have been jailed for offering those bribes. In the municipal bond deal, three minor bureaucrats were actually convicted and the firms had to pay hundreds of millions of dollars in fines. But those fines were peanuts compared to what they stole.

The bankers remain the unchallenged masters of the American economy and political system.The financial sector has constituted itself as a shadow but sovereign government which collects taxes by means of what the rest of us would call corruption and theft. These crimes impose real costs on anyone who has paid local taxes or borrowed money in the past years.

If one of the big banks becomes reckless, even criminally reckless, to the point of insolvency, we the taxpayers have agreed to dig into our tax money to bail them out. If we catch them cheating or stealing, we will fine them but will never put them in jail nor otherwise punish individuals. Now that's really criminal.