Watch out, banks that engage in criminal activity (aka just about every large bank): Eric Holder and the Department of Justice are coming for you!
I’ll give you a moment to stop chuckling. Seriously, though, Attorney General Holder said it himself. In a video released Monday morning, Holder vowed that prosecutions of banks that operate outside of the law are forthcoming, claiming, “There is no such thing as ‘too big to jail.’”
“Some have used that phrase [“too big to jail”] to describe the theory that certain financial institutions – even if they engage in criminal misconduct – should be considered immune from prosecution due to their sheer size and their influence on the economy,” Holder elaborated. “That view is mistaken.”
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Hmmm, where would they get the idea? Maybe from Holder himself, who just last year said, “I am concerned that the size of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute, if we do bring a criminal charge, it will have a negative impact on the national economy.”
Add that to the fact that, in the past several years, banks have been implicated in all sorts of fraudulent, unconscionable activities, yet the Department of Justice hasn’t brought a single major bank to trial. The worst that’s happened to the banks is that they pay out-of-court settlements where they admit to nothing and pay fines that are a fraction of the profits they made from their criminal behaviors. In other words, these punishments are slaps on the wrist that still prove profitable to the banks. If the government is not outright colluding with these financial institutions, it is at least willfully standing by and allowing it to happen.
Although Holder’s recent vow raises justifiable skepticism, there is some reason to be optimistic. His comments were not off-the-cuff remarks to a reporter, but part of a carefully planned video release. Holder also said, “I am personally [emphasis his own] monitoring the status of these investigations; I am resolved to seeing them through.” By staking his own reputation on future prosecutions, he indicates that trials are in the pipeline.
Although Holder did not mention any specific banks by name in his video release, many speculate that the statement is a reference to banks like BNP Paribas SA and Credit Suisse AG. BNP Paribas is in hot water – to the tune of more than $1 billion – for violating U.S. sanctions with Iraq. Meanwhile, Credit Suisse is being investigated for helping Americans to hide money to avoid paying taxes in the United States – you know, typical Swiss bank account stuff.
While I wish the singled out banks would have more significant domestic ties (like the mortgage fraud at Bank of America and Wells Fargo, for example), I’ll take precedent wherever we can get it.
For the trials to actually be effective and serve as a deterrent to Wall Street CEOs, they will have to ultimately put employees in jail. Fortunately, Holder is now saying that prison is on the table. Seeing a few cronies behind bars might prompt other executives to start seeing their misconduct as a legitimate crime rather than merely a “business risk.”
Overall, I’m still wary that Holder’s pledge is yet another case of “saying the right thing while doing the opposite” that the Obama administration is known for. Will criminal banks finally be prosecuted? I’ll believe it when I see it… but, in this case, I would love nothing more than to be proven wrong.