To grow up in South Florida during the 1970s and 1980s, as I did, wasn't your typical American childhood experience. Back then the area was known as the most dangerous place in the country.
Carnage from the drug wars filled the local news long before "Miami Vice" became a hit TV show. By elementary school, my friends and I knew some of the lingo. A Colombian necktie wasn't a piece of clothing, but a gruesome execution method. When I was 7 my barber was murdered in his shop, apparently over a drug deal.
It had been a long time since I thought much about those days. By chance I recently came across a fabulous documentary, "Cocaine Cowboys," by Miami filmmaker Billy Corben. Then last month a Senate panel held a hearing on the British bank HSBC Holdings and its ties to drug lords, money laundering, al- Qaida and rogue nations such as Iran and North Korea.
Here's a bank with $2.7 trillion of assets that flouted U.S. laws for a decade, according to the July 17 report by the Senate Permanent Subcommittee on Investigations. HSBC turned a blind eye to organized crime, Mexican drug cartels and overseas terrorism financiers, and gave them access to the U.S. banking system. HSBC's main U.S. regulator, the Office of the Comptroller of the Currency, for years tolerated its violations of anti-money laundering laws.
For this, HSBC and the OCC apologized. Justice Department fines are likely. It's an outrage HSBC hasn't had its U.S. banking licenses revoked, assuming the Senate panel's report is accurate - and there's no reason to believe it isn't.
Let's try out a novel idea: Banks that help drug cartels launder money and give cover to those tied to terrorism should be put out of business. Is that really so hard for everyone to agree on? Free markets have worked in the U.S. because we have the rule of law. It's why so many investors from other countries want to do business here. When contracts are breached, courts can be accessed to enforce them. When individuals or companies commit crimes, they're supposed to be prosecuted and punished.
Except we have this mutant species of corporation called too-big-to-fail banks whose collapse might wreck the global economy. No financial institution in the U.S. can survive a felony indictment. So these companies have become un-indictable, creating a perverse nonchalance regarding financial crimes. In 2010, Wachovia paid $160 million to settle criminal allegations of laundering Mexican drug money. By then the bank had been bought by Wells Fargo & Co., and the Justice Department let it off with a deferred-prosecution deal. Usually the most that happens to management is someone resigns, as HSBC's head of compliance, David Bagley, said he would at last month's Senate hearing.
What would it take for the government to really crack down on wrongdoing in the financial-services industry? What finally prompted the feds to do something about cocaine smuggling into South Florida long ago was the epidemic of violence it spawned.
A defining moment came in July 1979, when drug traffickers went on a shooting spree in broad daylight at the Dadeland Mall in Kendall, southwest of Miami. This was unprecedented. The gunmen arrived in a delivery van that had been converted into an armored personnel carrier. Two people were killed. Bystanders dove for cover. Cars in the parking lot were riddled with bullets from machine-gun fire.
Attacks like that became frequent over the next few years. In 1979 there were 349 murders in South Florida, according to the Justice Department, triple the number of two years earlier. By 1981 murders had climbed to 621. The local police were outgunned, outnumbered, easily corrupted and often stoned. Finally in 1982 President Ronald Reagan formed a task force and devoted hundreds of additional federal agents to South Florida to restore law and order.
Back then, too, the cartels' enablers included dirty banks. As Corben's film noted, in 1979 the Federal Reserve's Miami branch reported a $5 billion cash surplus -- more than the country's other Federal Reserve banks combined. One crucial difference, compared with today, was the drug banks in those days were relatively small. When an outfit such as Sunshine State Bank got busted, it didn't threaten the economy.
In terms of stray bullets, Miami is a much safer place today. But mainly what the United States did was drive the cartels, the turf battles and the killings into Mexico, where the violence is out of mind for most Americans even while much of that country has turned into a narco-state.
Maybe if the bankers were the ones spraying machine-gun fire in the streets, that might spur the U.S. government to take meaningful, punitive action. Short of that, you have to wonder if anything would. Too-big-to-fail isn't merely an economic problem. It is a great moral failing of our society that poisons our democracy. Something has to give.
Writer Jonathan Weil is a Bloomberg View columnist.
PICTURED: David Bagley, the head of compliance for London-based HSBC Holdings, testifies July 17, 2012, pefore the permanent Subcommittee on Investigations hearing, "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History." He said at the Senate hearing that he would resign. (AP Photo)