Opinion

Eric Holder mulling criminal prosecutions for big banks

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Beltway Confidential,Opinion,Joel Gehrke,Eric Holder,Chuck Grassley,Sherrod Brown,Wall Street

Attorney General Eric Holder emphasized that no bank is "too big to jail" in a video message that suggests that officials at the "too big to fail" banks involved in the 2008 financial crisis might yet face criminal charges.

"[I]t is fully possible to criminally sanction companies that have broken the law, no matter their size," Holder said, citing the need for coordination between criminal investigators and federal regulators. "While I will not specify any particular targets, I will say this: I am personally monitoring the status of these ongoing investigations, I am resolved to seeing them through, and in doing so, I intend to reaffirm the principle that no individual or entity that does harm to our economy is ever above the law."

Holder has been under bipartisan pressure to bring criminal charges against banking institutions. “Wall Street megabanks aren't just too big to fail, they're increasingly too big to jail,” Sen. Sherrod Brown, D-Ohio, said in January when sending a letter about the issue to Holder. “Already, the nation's six largest megabanks enjoy what amounts to taxpayer-funded guarantee by virtue of their size, making it harder for regional and community banks to compete. Now, these megabanks may also enjoy some impunity when they violate the law by laundering money or illegally foreclosing on homeowners. Wall Street should pay the full price of its wrongdoing, not pass the costs along to taxpayers.”

Sen. Chuck Grassley, R-Iowa, who joined Brown in sending that letter, emphasized that “the best deterrent to crime is to put people in prison.”

A Justice Department official replied that “no corporate entity, no matter how large, is immune from prosecution,” but added that prosecutors are right to also consider “collateral consequences.”

Brown and Grassley were not happy. “The Justice Department's response is aggressively evasive," they said in March. "It does not answer our questions. We want to know how and why the Justice Department has determined that certain financial institutions are ‘too big to jail' and that prosecuting those institutions would damage the financial system."

Holder defended consulting with regulators. "It is true that criminal charges involving a financial institution can sometimes trigger serious follow-on actions by that company's financial regulators," he said. "In some cases, it may even trigger the loss of the institution's charter. In preparing a case, it would be irresponsible not to consider that fact. But rather than wall off banks from prosecution, the potential for such severe consequences simply means that federal prosecutors conducting these investigations must go the extra mile to coordinate closely with the regulators that oversee these institutions' day-to-day operations."

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