Treasure Islands tells us that tax havens are much larger and much more destructive than most might realize, yet at the same time enjoy much more unofficial and formal support from governments in advanced economies than many of us want to believe.

Last June, Bloomberg did a long story on the Deferred Prosecution Agreement that Wachovia negotiated with DOJ. As “punishment” for helping Mexican drug gangs to launder more than $363 billion through casas de cambios for three years, Wachovia had to pay $50 million fine and a $110 million forfeiture of the proceeds that were clearly from drug gangs.

We watched as one man everyone knew to be brutally crazy stole his country’s riches and put them aside for the moment when he would need them. Having watched him do so, we are now limited in the means by which we can pressure him.

Former House Majority Leader Tom DeLay, earlier convicted on conspiracy and money laundering charges in Texas, today was sentenced by Judge Pat Priest to three years in prison. The sentence was directly on the conspiracy charge; on money laundering, his five-year sentence was probated for 10 years, and so he will serve 10 years’ probation.

Well, that didn’t take long [snark].

The efforts to keep Wall Street and all its celebrated creativity intact could serve to make it easier for banks like Wachovia to engage in widespread money-laundering. That is, it’s not just shadow banking as it is politely understood, but banking for entire shadow networks, both our own and our enemies.