Lawmakers today told Attorney General Eric Holder that the Justice Department has been too meek in prosecuting individuals responsible for the financial crisis, even as he listed 10 major banks and firms that have had individuals plead guilty.
Rep. Jerrold Nadler (D-N.Y.) doesn’t think the department hasn’t gone far enough.
“Going after a company that can pay a fine paid for by the shareholders is not the same as prosecuting someone who is something other than a small fry,” Nadler said during a Tuesday hearing of the House Judiciary Committee.
As an example of the sort of enforcement he expects to see, Nadler cited the government’s crackdown in the 1980s following the savings and loan crisis, which led to executives going to jail. By contrast, he noted a “total failure” of the Justice Department to hold architects of the mortgage and financial crises accountable for their crimes.
Rep. Ted Deutch (D-Fla.) said corporate settlements related to the financial crisis seem to absolve top executives of any criminal jeopardy.
“They’re not minor infractions, they didn’t happen by accident,” Deutch told Holder. “And it’s difficult to believe that this activity happened without the knowledge of any of the executives.”
Holder pushed back, taking issue with a recent report by Inspector General Michael Horowitz, which said the Justice Department’s efforts to crack down on mortgage fraud fell short of its public bravura following the financial crisis.
Holder told Nadler that mortgage prosecutions nearly doubled once they were prioritized by the department, and in November, JP Morgan agreed to a $13 billion settlement tied to bad mortgages.
“I think this reflects a really rapid mobilization on the part of the department,” Holder said of the increase in cases.
The department has been criticized widely for its use of deferred prosecution agreements, which don’t require guilty pleas from companies, but Holder today told the committee that since 2013 the department has secured guilty pleas in cases against UBS Securities Japan Co. Ltd., RBS Securities Japan Limited, SAC Capital Management Companies and Wegelin & Co.
Pleas have also been secured from employees at JP Morgan, Goldman Sachs, Morgan Stanley, Credit Suisse, UBS, Rabobank, ICAP, Galleon Group, SAC Capital and Stanford Financial, Holder told lawmakers.
“It is still the position of the Justice Department that there is no institution that is too big to prosecute, no individual that is too important,” Holder said, noting that the JP Morgan settlement has a carve out that allows prosecutors to target individuals.
The Attorney General said criticizing the department’s response makes for a good talking point but is “inconsistent with the facts.”
Deutch today referenced remarks by U.S. District Judge Jed Rakoff, who has vocally criticized the department’s response to the financial crisis for targeting companies, not the employees responsible for the actual bad conduct.
“None of these decision makers at any of the companies has been held accountable,” Deutch said.