Testimony by a top Justice official and documents abtained on Wednesday during a House financial services committee hearing showed that financial regulators and the Treasury Department didn’t warn prosecutors about the economic consequences in the financial system of criminal indictments against large financial groups.
As The Huffington Post reports, DOJ also couldn’t find any records that would substantiate its previous claims that it weighed potentially negative impacts when considering criminal charges, said Mythili Raman, acting assistant attorney general for the criminal division.
The results of the Wednesday’s hearing would probably raise questions to the Obama administration, which has been accused of a lackluster enforcement record against big banks in the financial crisis and other matters.
It is likely to put further pressure on the Justice Department to strengthen future prosecutions. Not long time ago, instead of filing criminal charges against large financial groups, federal prosecutors filed criminal cases against subsidiaries.
Observers including lawyers at Weil, Gotshal & Manges LLP, a top defense firm, said that Justice may expand its limited use of criminal indictments in part due to public pressure.
Attorney General Eric Holder told Congress a few months ago that some banks were “too large,” impeding attempts to bring criminal prosecutions. His comments are perhaps the most explicit public admission of concern by a senior Obama administration official regarding big banks.
Though Holder has since attempted to walk back those comments, at the time he said that the size of large financial institutions “has an inhibiting influence – impact on our ability to bring resolutions that I think would be more appropriate.” He further told lawmakers: “And I think that is something that we – you all – need to consider.”
At the Justice Department’s news conference Lanny Breuer, the former assistant attorney general for the criminal division, was questioned why the agency did not pursue a criminal indictment.
“If you think that by doing a certain thing you risk either a charter being revoked, you think that counterparties in a massive financial institution may go away, you think that there is a risk that many, many innocent people will be harmed from a resolution,” Breuer explained.
He went on, adding: “And by another resolution you think you can mitigate the risk of innocent people suffering, the economy being affected, and you can hone in on those and the institutions and address the issues underlying. To the Department of Justice, that’s a very real factor, and so it is a factor you consider.”
When asked whether jobs were a factor in DOJ’s decision, Breuer replied: “Collateral consequences were absolutely a factor.”
DOJ’s Raman told reporters Wednesday that the agency couldn’t find any records regarding threats to the economy or the financial system when weighing criminal indictments against big banks in past cases. She added that the agency could not locate any such documents from U.S. or foreign regulators.