On Monday, May 5, 2014, Attorney General Eric Holder released a video statement on behalf of the DOJ to address congressional and public concern that certain financial institutions have been deemed “too big to jail,” therefore preventing necessary prosecutorial actions in response to actions contributing to the financial crisis of 2008.
The attention around this issue emanates from criticism from Washington interest groups, such as the CATO Institute, and congressional committees, including the Senate Judiciary Committee and Senate Subcommittee on Permanent Investigations. The DOJ fell under scrutiny after Attorney General Holder testified before the Senate Judiciary Committee in March of last year. Senator Chuck Grassley (R-IA) expressed concern that the DOJ was not taking the necessary actions to prosecute financial institutions. Attorney General Holder shared the concern, stating that the agency had difficultly prosecuting financial institutions because of fears that such proceedings would “have a negative impact on the national economy, perhaps even the world economy.”
In the video, Attorney General Holder seems to deviate from his earlier statement contesting the validity of the “too big to jail” notion, commenting that financial institutions and their employees are never “immune from prosecution,” nor are they “above the law.” He acknowledges the economic consequences that can result from criminal charges, but says that for that reason, the DOJ must “go the extra mile to coordinate with the appropriate federal financial regulators.” Attorney General Holder concludes his remarks with a stronger stance, noting that the DOJ is pursuing several new important investigations and is “resolved to see them through.” Note – Although the DOJ is currently pursuing actions against Credit Suisse and BNP Paribas, the statement suggests that additional large-scale investigations of financial institutions are underway.
The DOJ’s statement suggests that the agency will seek to reassert its authority to prosecute wrongdoings in the financial sector, especially those related to the financial crisis, through the end of the current administration. The comments of Attorney General Holder in congressional testimony are also relatively revealing. For example, in response to criticism from Senator Grassley, he responds that, in his opinion, the “greatest deterrent effect is to prosecute the individuals [not corporations] that are responsible.” He cites the 2008 UBS prosecution as a successful example. These comments should come as somewhat of a relief to financial institutions, demonstrating that the DOJ at least intends to continue to pursue guilty individuals, not entire corporations.
The DOJ response also illustrates the influence of Congress and the pressure it can impose on the agency’s agenda. Earlier this year in February 2014, Senator Carl Levin (D-MI) criticized the DOJ’s prosecution of Credit Suisse. Notwithstanding the intervention of the Swiss government, Senator Levin said the DOJ failed to take all of its available actions, including enforcing subpoenas against Credit Suisse in domestic courts and issuing a John Doe summons as it did in the case of UBS. Based on these comments and earlier DOJ reactions, it can be expected that the DOJ may pursue these options in similar situations in the future.
DOJ video announcement – http://www.justice.gov/agwa.php
Senate Judiciary Committee Hearing Segment (Attorney General Holder and Senator Grassley) – http://www.americanbanker.com/issues/178_45/transcript-attorney-general-eric-holder-on-too-big-to-jail-1057295-1.html