On April 10, 2006, Mexican authorities searched through a DC-9 jet at the airport in Ciudad del Carmen. They found more than five tons of cocaine… valued at more than $100 million.
If you’re like many Americans, you’re not surprised by a story like this. Not a year goes by without a few big media stories about Mexican drug cartels.
However, you probably will be very surprised to learn who aided and abetted the drug operation: it was US banking giant Wachovia.
After an investigation that took years, Wells Fargo, which now owns Wachovia, paid a $160 million fine to settle the case. “Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” said federal prosecutor Jeffrey Sloman.
You might also be surprised to hear that Wachovia’s fine wasn’t an isolated case.
Citibank was caught laundering money for a Mexican drug kingpin in 2001.
American Express Bank admitted to laundering $55 million in drug money in 2007.
And the FBI accused Bank of America of helping a Mexican drug cartel hide money in 2012.
You’ve probably never heard these stories before. The big banks pay a lot of money to keep it that way.
Every year, America’s biggest banks spend hundreds of millions of dollars to create a simple, wholesome image: They’re here to help out families and small businesses. They’re the conservative stewards of our capital, and they always play by the rules.
The big banks employ some of the world’s best marketers. They buy politicians with large campaign contributions. They’re also huge advertisers, which lets them wield enormous influence with the mainstream media.
But if you look past the brochures that feature all-American families, golden retrievers, and small business owners, you’ll get a much different idea of what banks are all about.
You’ll see that our nation’s biggest banks are among the most flagrant lawbreakers in the world. They’re routinely fined hundreds of millions – even billions – of dollars for screwing customers and rigging financial markets.
In 2011, Bank of America paid a $335 million fine for discriminating against black and Hispanic borrowers.
In 2013, J.P. Morgan paid $410 million for manipulating the electricity market. Later that year, it paid $13 billion to settle claims that it knowingly sold toxic loans.
In 2014, Bank of America paid a $6.3 billion fine for selling faulty mortgages.
And in 2015, five big banks paid $5.8 billion for rigging the currency markets.
This is just a short list of banks breaking the law and getting fined. Boston Consulting Group reports that banks have paid more than $178 billion in legal claims since the financial crisis.
These are the nation’s largest banks. Millions of Americans rely on them. We trust them to be conservative with our cash and keep it safe. We trust that our credit cards will work when we buy groceries.
Above all, we trust them to keep the financial system working… a trust they broke in 2008 when the biggest banks failed and needed bailouts.
These banks have no problem breaking the law if it benefits them. They’re caught screwing over customers all the time. And they’re caught helping criminals all the time. Paying the fines is just a small cost of doing business.
And it’s well worth it… the banks make far more money from their illegal activities than they pay in fines.
With the nation’s largest banks operating this way, do you trust our financial system to hold up during the next crisis?
by Dan Steinhart | October 23, 2015