Elizabeth Warren Confronts the Atrocity of Drug Money Laundering by Big Banks

Heavens to Betsy. Sen. Elizabeth Warren leapt from the gate of her first term pummeling Ben Bernanke on too-big-to-fail financial institutions. Then she demanded to know why American banks were never brought to trial. Finally, last Thursday, looking for all the world like a school principal called to sort out teenage hooligans, she queried regulators as to why HSBC bankers who launder money for drug lords and terrorists should go free. Quoth the senator:

"If you're caught with an ounce of cocaine, the chances are good you're going to jail. If it happens repeatedly, you may go to jail for the rest of your life. But evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night.”

Game on! Naturally, the left is swooning. Elizabeth Warren says what we all wish we could say to the besuited jerks who defend a crooked industry. Except, instead of snatching them by the lapels and screaming obscenities as we might do, Warren sits calmly and repeats her inimitably direct questions like a blond Terminator. The big banks and their lackeys can’t stand her, and it looks as if the feeling is mutual.

Americans love her because we have serious unfinished business with the banking industry. We remember how the White House chose to protect the bankers from the pitchforks in the wake of the financial crisis. We’ve gritted our teeth as bankers have charted a course to record-breaking profits as the rest of us slogged through a shitty economy.

Now it feels like the day we hoped for. The one the banking industry feared as it tried to thwart Warren's victory in 2013. There's a new sheriff in town, a real champion for the 99 percent who will not accept a two-tiered justice system and who dares look the criminal and the complicit in the eye. That Warren's showdown in the Senate Banking Committee corral came just a day after Attorney General Eric Holder fessed up to the fact that some banks are so big and powerful they are really above the law felt like balm on a freshly salted wound.

Economist Robert Johnson, executive director of the Institute for New Economic Thinking, who served as chief economist to the Senate Banking Committee under the leadership of William Proxmire, praised Warren's resolve in an email to me: "Elizabeth Warren has chosen to do something novel as a US senator: represent the people. In our money-drenched political system that is akin to defying gravity. God bless Elizabeth Warren."

Warren is certainly making welcome noises in these early days of her tenure. She is breaking a taboo in speaking up so forcefully this early in the game, as newbie senators are generally expected to keep their heads down. Cynics cannot deny the fact that it actually matters tremendously that someone knowledgeable is at the table. If regulators know they'll be cross-examined by a person who knows what they're up to, they may think twice about what they're (not) doing. They can't completely ignore congressional pressure, particularly as Warren is a majority member of the Senate. On HSBC, unfortunately, the case is probably closed. But banks certainly hate the negative light Warren shined on them with her latest confrontation. And that's welcome news. This is not small potatoes.

However, Warren will need to follow up her tough talk with serious legislative proposals that she could build support for as she takes the lead on banking issues. As Yves Smith has pointed out on Naked Capitalism, the real test of her tough-mindedness “will come through the letters, speeches, and positions she takes on banking matters outside the formal Committee sessions."

Early in the 20th century, a largely forgotten group of independent-minded populists came to Washtington to speak up for the needs of ordinary citizens against financial predators, like Nebraska's George W. Norris and South Dakota's Peter Norbeck, who appointed one Ferdinand Pecora as Chief Counsel to the U.S. Committee on Banking and Currency and thereby opened up a can of whup-ass on Wall Street following the crash of '29.

America hasn't seen the likes of these politicians in a long, long time. If Warren can withstand the forces that will want to pull her into the general White House PR machine, we might just get one.

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