How you are paying for "too-big-to-jail"

"Holder admits to the Judiciary committee that the “Justice Department” intentionally refrained from bringing criminal charges against the bank officials of large banks caught in money laundering for Mexican drug cartels."

(Reuters) - Now that it is official that the U.S. Justice Department pulls its punches when it comes to prosecuting the largest banks, it is time for investors to understand why they, too, are the losers.

Attorney General Eric Holder came right out this week and told the Senate Judiciary Committee what many observers have long suspected - that his department has refrained from more aggressive criminal prosecutions of the so-called too-big-to-fail banks, exactly because of their special status.

"I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that ... if we do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy," Holder said on Tuesday. "I think that is a function of the fact that some of these institutions have become too large."

Lawmakers have expressed surprise that no corporate or personal criminal prosecutions emerged from the HSBC Holdings Plc case, in which the bank was fined $1.9 billion over money laundering, including money from Mexican and Colombian drug cartels.

Justice Department officials also cited economic stability concerns in December when announcing a $1.5 billion fine, but no criminal charges, against UBS AG, in a multiyear scheme to manipulate Libor and other benchmark interest rates.

In short, we have the top law enforcement official in the United States admitting that if a bank is big enough and systematically important enough, it will not be subject to the same laws as the rest ........

The article doesn’t really answer the question the lede implies. Please tell us how we are paying for the doctrine of too big to fail. The answer is provided by economist Franz Oppenheimer who observed that there are only two ways of gaining wealth. He called one the “economic means” by which he meant the creation of value in free exchange. The second he called the “political means” by which he meant cronyism, regulatory capture, special favors, subsidies, exemptions and government carve-outs.

When people see that with the right connections, the right lobbyists, the right campaign contributions, the right friends, that they can make money instead of having to work for it, they will tend to allocate their finite energies and resources to the former (the “political means”) rather than the latter (the “economic means”).

When the political incentives are for big business to be corrupt because it gets more allowances from government, then we will get corrupt big business. This means we get also get corruption down the line until we reach the “little people” from whom the law always applies.

So Jon Corzine’s commodities firm loses over a billion dollars of customer money and he still is walking free, but lesser figures who lose their customer’s money go to jail in a New York Second.

This does not end well for anyone except those who are at the very top and can exempt themselves from the penalties.

To drive down the “approval rating” of democrats all a few PACs need to do is show the “little guy” goes to court vs. the insiders...who contribute to the RAT Party. Run tv advertising for a few weeks and the low info voters will begin to see that “sucker” is flashing on their foreheads. Thesame thing can be done about hiring or keeping your health plan - these topics should be on TV every day to let folks see who the voted for and what their vote REALLY means to their life.

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