Will 2013 be the year when the global banks that have done so much damage to the world economy are finally brought to heel? It finally seems possible, though still unlikely.

It is now more than five years since the collapse of two hedge funds associated with the Bear Stearns investment bank gave the first sign of the impending global financial crisis. Since then, tens of millions of ordinary people have experienced unemployment, foreclosure and bankruptcy. Meanwhile those who caused the crisis, and were bailed out by the governments of the world, have continued to prosper. Far from changing their ways, the banks have concluded, so far correctly, that as the “Masters of the Universe,” they can act as they please, with complete impunity.

In the last month, we have seen two spectacular cases of criminal conduct settled with the usual wrist-slap. HSBC, the largest bank in the United Kingdom, was found to have engaged in systematic money laundering on behalf of drug dealers, tax evaders and dictatorial governments. U.S. prosecutors failed to pursue charges, instead accepting a penalty of $1.9 billion, or about a month’s worth of HSBC profits.

Then a week ago, the leading Swiss bank, UBS, was fined $1.4 billion for its part in the manipulation of the London Interbank Offered Rate (LIBOR), which is the basis of the largely self-regulated London financial markets.

These are not isolated aberrations. HSBC was up to its neck in the LIBOR scandal, and UBS has engaged in money laundering and tax evasion on a massive scale for decades.

Nor are these two banks, and their lenient treatment, exceptional cases. The LIBOR scandal encompassed all the major banks operating in the London financial market. The same was true of Wall Street and the epidemic of fraudulent speculation centered on mortgage markets in the leadup to the global financial crisis.

Despite this, not a single bank has had its license withdrawn, and, until recently, none of these events led to any individual facing criminal charges. On the contrary, many of the leading figures in these disasters have gone on to bigger and better things, and even the outright failures retain wealth beyond the dreams of any ordinary person.

The reasoning behind this general grant of immunity is compelling in its own way. On the one hand, the corruption of the financial system is so comprehensive that no individual can be held responsible. On the other hand, the financial institutions are so large and intertwined that the failure of any one could bring the entire system crashing down, as almost happened with the Lehman failure in 2008.

The corruption of the financial system would be bad enough if the promise of unending prosperity for all, held out in the 1980s and 1990s, had been delivered. In fact, nothing of the sort has happened. GDP per person in the United States and EU has yet to recover its pre-recession peak, and is barely above the levels prevailing at the turn of the century. With the wealthy, and particularly the financial sector, creaming off an ever larger share, the real income of the median United States household is no higher than it was 20 years ago, and the poor have gone backward even further.

It seems, however, that the latest events may have pushed public tolerance too far. The consistent criminality of UBS in particular, has reached the point where calls for the bank to be criminally charged or even shut down are echoing across the political spectrum, from Democratic Senator Carl Levin to the New York Times to William Cohan at Bloomberg to the rightwing Daily Mail in the UK.

It is true that such actions would bring an end to the financial system as we know it today. To bring the system back under control it would be necessary to break up the big global banks, and in particular to separate retail and investment banking. But this would do no more than restore the situation that prevailed before the financial deregulation policies of the 1980s and 1990s, policies that have produced nothing but disaster.

Restoring control over a failed financial system will be a long and painful process. But it will only begin when regulators and prosecutors show that the global banking system is not above the law. If 2013 sees the end of some of the worst offenders, that will be a start.

John Quiggin is a professor of economics at the University of Queensland, Australia and adjunct professor at the University of Maryland, College Park. He is author of Zombie Economics: How Dead Ideas Still Walk Among Us (Princeton University Press, 2010).

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