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Very Large Loss for Criminal HSBC

Feb. 22, 2017 (EIRNS)—There is trouble for the world’s historically and currently most crime-ridden big bank, HSBC Banking Corp., for a century-and-a-half named Hong Kong and Shanghai Banking Corp. and deeply involved in the international drug trade. U.S. Senate investigators in 2011 showed that "HSBC" was still laundering money on an $11 billion scale for both Central American drug cartels and a Saudi bank which financed terrorism.

On Feb. 20, HSBC reported a very large loss, $4.23 billion, in the fourth quarter of 2016, and essentially has made no unadjusted pre-tax profits over the past five quarters—very dangerous for such a large and leveraged bank. HSBC Stock has plunged 9% on the NYSE and FTSE stock markets over two days since. Even more stark was the bank’s 20% drop in total revenue from $60.8 billion in 2015 to $48.9 billion in 2016.

Notable among the large "one-time" losses HSBC took in the fourth quarter of 2016 were nearly $5.6 billion in losses directly and indirectly stemming from its derivatives exposure and forex derivatives trading. (It also finally paid its slap-on-the-risk money-laundering fine, but that was only $1.5 billion.) The bank announced it is going to try to recover by buying its own stock ($1-2 billion worth), but may make more losses that way.

The Wall Street Journal, with perhaps unintentional irony, noted: "HSBC’s struggles to get on top of its financial crime-fighting systems continued. It spent $1.6 billion on implementing anti-money-laundering systems and controls used across the bank, but the monitor overseeing its compliance with a 2012 U.S. legal settlement found continuing deficiencies."

There were "failings in its U.K. anti-money-laundering controls at the end of 2016, causing the U.K. financial regulator to order a fresh review," wrote the Journal.

Meanwhile, according to qualified sources, Goldman Sachs, which had moved its largest hedge funds to London since 2012, pretending they were "separately capitalized" there, has returned the hedge fund HQ to the United States. This is in anticipation of a House GOP bill, not yet formally introduced but well-known, which would effectively completely deregulate banks as long as their own models showed them with a 10% capital ratio, 15% for SIFIs.

The only alternative to the continuing London/Wall Street criminality, is a restored Glass-Steagall Act.