D.C. Time Warp

Ted Kaufman is a former Democratic Senator from Delaware.

Why DOJ Deemed Bank Execs Too Big To Jail

Ted Kaufman, Forbes

7/29/2013 @ 9:30AM

I guess you have to be something of a masochist to quote yourself being so wrong. In my defense, who could have imagined that:

a) The six largest banks would pay $62.2 billion in fines to settle lawsuits in the past three years, led by Bank of America, Wells Fargo and JPMorgan Chase. (SNL Financial estimate)

b) It will take $24.7 billion to settle pending suits, most of them involving the mortgage junk sold to investors. (Compass Point estimate)

c) Despite the fact that a+b=$86.9 billion, not one bank has ever had to admit to any wrongdoing.

d) Not one dollar of the $86.9 billion has been paid by any bank executive. Shareholders took all the hits.

…

Why? Why has no one been held responsible? There are many reasons, including the complexity of the cases and the lack of criminal referrals from the regulatory agencies. But perhaps the key reason is that those most responsible for indicting and prosecuting Wall Street executives seem to believe that, just as there are banks that are too big to fail, there are people who are too big to jail.

In a speech he gave last fall, the retiring head of the Criminal Division in the Department of Justice, Lanny Breuer, explained that position: “To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs and economists who argue that the collateral consequences of an indictment would be devastating for their client. In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects.

“Sometimes-though, let me stress, not always-these presentations are compelling. In reaching every charging decision, we must take into account the effect of an indictment on innocent employees and shareholders, just as we must take into account the nature of the crimes committed and the pervasiveness of the misconduct. I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake. And, in some cases, the health of an industry or the markets is a real factor. Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.”

From my point of view, this is certainly a novel approach to prosecutorial decision-making. It is doubly puzzling because, back in 2009 and again in 2010, I chaired two Judiciary Committee Hearings on the Fraud Enforcement and Recovery Act. In extensive testimony in those hearings, and in meetings in my Senate office, Mr. Breuer never said anything like it.

…

Nothing I have seen in the past four years leads me to believe that Wall Street as a whole learned much from the events of 2008-2009. The government’s bailouts that helped the big banks survive have been pretty much forgotten. The multimillion-dollar bonuses are back with a vengeance, and with them incentives to cut corners and, for some, to circumvent the law.

I only wish that Justice Department action matched Attorney General Holder’s words when he said, introducing his task force, “The mission is not just to hold accountable those who helped bring about the last financial meltdown, but to prevent another meltdown from happening.”

Duh.