Eric Holder has been watching his Elizabeth Warren videos, or something, because during a Senate hearing today, the attorney general came out and said that big Wall Street banks are too large and systemically important to be prosecuted effectively — a claim that critics of the Justice Department have made over and over again, while accusing them of being too soft on law-breaking institutions like HSBC and UBS.
Here's the full exchange:
GRASSLEY: OK. On the issue of bank prosecution, I'm concerned that we have a mentality of too-big-to-jail in the financial sector of spreading from fraud cases to terrorist financing and money laundering cases -- and I cite HSBC. So I think we're on a slippery slope.
So then that's background for this question. I don't -- I don't have recollection of DOJ prosecuting any high-profile financial criminal convictions in either companies or individuals. Assistant General -- Attorney General Breuer said that one reason why DOJ has not brought these prosecutions is that it reaches out to, quote/unquote, "experts" to see what effect the prosecutions would have on the financial markets.
So then on January 29th, Senator Brown and I requested details on who these so-called experts are. So far, we've not received any information. Maybe you're going to, but why have we not yet have been provided the names of the experts that DOJ consults with as we requested on January 29th? Because we need to the find out why we aren't having these high profile cases.
And then I got one follow-up. But maybe you can answer that quickly.
HOLDER: Well, we'll endeavor to answer your letter, Senator. We did not, as I understand it, retain experts outside of the government in making -- in making determinations with regard to HSBC. Now, if we could just put that aside for a minute, though. The concern that you have raised is one that I, frankly, share. And I'm not talking about HSBC now. That would not be appropriate.
But 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 you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large.
Again, I'm not talking about HSBC. This is just a – a more general comment. I think it has an inhibiting influence -- impact on our ability to bring resolutions that I think would be more appropriate. And I think that is something that we -- you all need to -- need to consider. So the concern that you raised is actually one that I share.
The bolded "you all" is the important one. Notice that Holder isn't really capitulating to his critics here. He's not saying, "Yes, you're right, we at the Department of Justice have taken it too easy on law-breaking financial institutions, because we're scared that if we prosecuted big banks criminally, it would put them out of business and wreak havoc on the economy." He's saying, "If we prosecuted big banks criminally, it would put them out of business and wreak havoc on the economy. So we don't do it." The implication being that, Congress, not the DOJ, has the onus to act, by passing legislation that would make banks smaller and more prosecutable.
That's a small distinction, but an important one. Holder is saying that if Congress wants big banks to be prosecuted when they break the law, it has to pass legislation to make that possible without throwing the financial system into chaos. Until then, his unstated message to Congress seems to be: Look, we're doing the best we can.