Updated: Aug 30
The Observer reports on how Wachovia – one of the United State’s largest banks before it was purchased by Wells Fargo in 2008 – laundered billions of dollars for Mexican drug cartels between 2004 and 2006, if not longer. This is not particularly surprising – Bloomberg reported on Wachovia’s money laundering about a year ago, and critics have long pointed to the central role of banks in the international black market. But it is grotesque, in ways obvious enough that I probably don’t need to elucidate them.
Anyway, what’s really interesting to me here is the way drug money helped save the banking industry from collapsing during the financial meltdown. This quote from the Observer article jumped out at me:
At the height of the 2008 banking crisis, Antonio Maria Costa, then head of the United Nations office on drugs and crime, said he had evidence to suggest the proceeds from drugs and crime were “the only liquid investment capital” available to banks on the brink of collapse. “Inter-bank loans were funded by money that originated from the drugs trade” he said. “There were signs that some banks were rescued that way.”
So drug money kept at least some of the banks afloat during the crash. At the same time, of course, taxpayers did their part. Indeed, Wachovia was purchasaed by Wells Fargo around the same time that it received $25 billion in taxpayer dollars. Wells Fargo wasn’t accused of laundering, and apparently cooperated with federal investigators, but nobody associated with Wachovia went to jail for the laundering and Wells Fargo ended up paying only tiny damages for the illegal activity of its acquisition – just $169 million.
So there you go. Taxpayers and drug cartels, working together to keep the banks afloat. Glad to see everything is working out as planned.