Attorney General Eric Holder has given the Justice Department an opportunity to rewrite his legacy as the lead federal prosecutor who refused to take on some of the most notoriously larcenous bankers in history.
Holder said Tuesday that he has given his underlings three months to determine whether they can secure indictments against bankers who are widely believed to have committed fraud while issuing, packaging, marketing and selling the residential mortgage backed securities (RMBS) that caused last decade’s multi-trillion dollar global financial meltdown.
“I don’t know if I’m making news now or not, but I asked the US Attorneys who made those cases and who are still involved in these RMBS cases over the next ninety days to look at their cases and to try and develop cases against individuals, and to report back in 90 days with regard to whether or not they think they will be able to successfully bring criminal or civil cases against those individuals,” he said in Washington, at a National Press Club event.
“That will ultimately be given to Loretta to make determinations about whether further action is appropriate,” he added, referring to Loretta Lynch, the current US Attorney in Brooklyn and the presumed next Attorney General who is awaiting Senate confirmation
Holder also stated that he believed prosecutions have not resulted from the 2008 global financial collapse “not for lack of trying.”
“These are the kinds of cases that people come to the Justice Department to make,” he said. “Young people who want to be assistant US Attorneys in the Southern District of New York, and Eastern District of Virginia and San Francisco live for these cases. The inability to make them, at least at this point, has not been a result of a lack of effort.”
That statement, however, obscures Holder’s prior remarks and the Justice Department’s reaction to investigations of “Too Big To Fail” Wall Street institutions.
According to an August report in The Nation, Ben Wagner, the US Attorney in Sacramento, was ready in 2013 to file a civil complaint against JPMorgan when Holder and the bank’s celebrity CEO Jamie Dimon personally intervened–a development described as “an unprecedented move” by the magazine.
“It’s not every day that the attorney general of the United States postpones the filing of a civil complaint against a powerful Wall Street bank at the request of its CEO so that the two sides can cut a deal in private,” Nation reporter, William D. Cohan wrote. “Whatever was in Wagner’s complaint, Jamie Dimon did not want it to become public knowledge.”
Holder’s statement Tuesday was consistent with this development in one sense—the case wasn’t brought “not for lack of trying.” It was, however, reportedly shelved in the absence of an “inability to make” the case, despite the Attorney General’s intonations on Tuesday. According to Alayne Fleischman, a JPMorgan whistleblower interviewed by Rolling Stone journalist Matt Taibbi, Wagner’s team was led by a talented litigator who “couldn’t wait to run with this case.” But “the government decided to help Chase bury the evidence,” Taibbi wrote, echoing Cohan’s conclusions.
While the Justice Department did secure a higher settlement than JPMorgan was willing to offer before Wagner prepared the complaint, taxpayers, investors and homeowners could have, potentially, received more. Holder has previously suggested that macroeconomic considerations, and not matters of law, have impacted his calculus in deciding to drop cases like the one crafted by Wagner’s office.
“I am concerned that the size of some 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, perhaps even the world economy,” he said in March 2013 testimony before the Senate Judiciary Committee.
In her confirmation hearing before the committee, Lynch attempted to distance herself from this mindset by claiming that “no individual is too big to jail and no one is above the law.”
She has herself, however, faced questions about her role overseeing a deferred prosecution agreement against HSBC, and her true philosophy regarding “Too Big To Jail.” The bank has faced allegations of breaking the law since it entered into the settlement with Lynch’s office—a deal that hinged upon the enactment of reforms.
The Justice Department is currently reviewing an independent investigation of HSBC probing whether it complied with the terms of the deal secured by Lynch. The details of that report are set to be revealed in April.
Although many observers fear that the typical five-year statute of limitations has expired on federal criminal acts related to last decade’s financial sector meltdown, US attorneys could attempt to use an obscure World War II-era law to bring cases against banks.
In one case against Wells Fargo, The Wall Street Journal reported in 2013, “the government said the usual time constraints don’t apply because a 1948 law called the Wartime Suspension of Limitations Act gives prosecutors unlimited time to go after alleged fraud during times of war.” The President has been authorized to use military force in War on Terror operations since 2001.