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Monday, October 24, 2016

Oct. 25 (Bloomberg) — See if you can make sense of this. Somehow, in the space of seven months, U.S. Attorney General Eric Holder has gone from being:

1) The defeatist law-enforcement chief who told the Senate Judiciary Committee that some banks are too big to prosecute because of the economic damage that might ensue, to

2) The crackdown artist who presided over a meeting in which his team told JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon that the bank would need to enter a guilty plea in order to end a criminal investigation by prosecutors in California.

What gives? Maybe Holder will let JPMorgan skate once the probe is completed. Yet clearly a new approach is afoot. After that meeting, the Justice Department proposed that JPMorgan plead guilty to making false statements related to sales of defective mortgage bonds. The bank proposed a non-prosecution agreement, which Holder rejected, according to an Oct. 22 article by Bloomberg News.

Not long ago, large banks could be fairly confident they wouldn’t face criminal charges in the U.S. no matter what they got caught doing. Now the Justice Department is keeping the threat of such charges hanging over JPMorgan while the bank wraps up $13 billion in civil settlements with various government agencies.

Holder said in an interview that the department’s new aggressiveness on bank investigations was a top priority for both President Barack Obama and himself. (Holder didn’t talk about JPMorgan specifically.) Obama promised in his 2012 State of the Union address to hold banks accountable for their role in helping cause the worst recession since the Great Depression. A task force was set up, and it played a significant role in the pending JPMorgan deal.

Other important questions remain unanswered. For instance, what about before 2012? Why did the Justice Department do so little to go after banks during Obama’s first term?

Here is one way to look at it: For about five years, there were entire categories of wrongdoing by large financial-services companies that were all but deemed exempt from criminal prosecution. We’ve never gotten a satisfactory explanation from anyone in the government as to why.

But it wouldn’t be a surprise if someday we learned that a conscious policy decision was made during the Obama administration’s early days that aggressive investigations of too-big-to-fail banks and their senior executives would be contrary to the national interest because of the threat that prosecutions posed to financial stability and the economic recovery.

Even if this isn’t what happened, the White House and Justice Department must know this is the outward impression they created by their unexplained inaction. What’s more, the facade of trying to look tough while doing almost nothing was coming undone. In August, for example, the Justice Department admitted to grossly inflating how many mortgage-fraud prosecutions it had brought in years past.

A crucial difference between now and when Obama took office is that the stock market has rebounded and the financial-services industry has stabilized after much help from the government, especially the Federal Reserve. Even so, public anger over the lack of accountability has failed to subside, and cynicism about Wall Street’s pull in Washington has skyrocketed. The government didn’t want to be seen as giving the banking industry a pass.

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Copyright 2013 The National Memo
  • m8lsem

    Give the man a break: “some banks are too big to prosecute because of the economic damage that might ensue” might just have been true, then, when the economy was in the tank, and have since faded into insignificance, now that the economy is slowly but continually improving.

    • Michael Kollmorgen

      Give them a break? Would they have done the same for the people who use their “services”? Hell No!

      • Allan Richardson

        If an individual borrower from a bank is convicted of fraud and fined heavily, the fines are not coming from the bank. If a BANK is convicted, the fines are paid out of BANK funds, which leaves less for the public to borrow, and harms the economy. It’s like executing one conjoined twin when the other twin is innocent, or (as actually happened with two of the Carribean’s most notorious female pirates in the 18th century) hanging a pregnant woman. In this case, the innocent “baby” is the entire economy.

        Personally I like the idea of fining (personally) and imprisoning the HIGHEST ranking corporate officer who knew about the crime and still allowed it to happen. Unfortunately, that is very difficult to know.
        The more of such antics I see, the more I think that banks ought to be government agencies like the OLD Post Office, not participating in the “game” of the economy in their own names, just “holding” money (for fees appropriate to break even) for the players. Like the Bank in the Monopoly game, which must not be partial, even to the player who is chosen to be the banker.

        And by the way, the inspiration for the cartoon Mr. Moneybags guy in the game? J. Pierpont Morgan himself.

      • m8lsem

        Had Holder caused a further crisis by leaning on big banks during the early days of what’s been called our Great Recession, then the Administration would have been blamed for killing the economy. You give them a no-win situation. When things are in the tank, when the water in the boat is up to the bench seats, is no time to speed upstream after who caused the river to rise suddenly. First you bail out the water.

        • Michael Kollmorgen

          I think you are probably right.

          The “people” would have lost in either situation. As we usually do anyway.

  • tigerakabj

    One thing people have to remember is that even though Bush left office, many of the people working for him did not. What they did is called “burrow,” in which traditional administrative-changing office were extended for a lot longer, reorganized at the last minute into civil service protection career jobs. In other words, in many parts of the government, including the Justice Department, President Obama and his administration was fighting against the GOP already entrenched.

    Remember how the Departments of the Interior reorganized the Mineral and Management Service post-BP oil spill. It was split into the Bureau of Ocean Energy Management, Bureau of Safety and Environmental Enforcement, and Office of Natural Resources Revenue. One of the reasons was to shake up the corruption of having these people who were industry lobbyists in charge of the departments that were supposed to oversee things like offshore permits. Now this wasn’t burrowing, but it was another example of how entire Departments (e.g. Labor) had become so corrupted following the disastrous Bush years.

    I don’t remember where I read it, but Holder said that it would take at least 1 term to root out the entire Justice Department, especially the Civil Rights Division. Heck, the entire department had become politicized thanks to Rove et al.

    We already know about the GOP party obstruction in terms of Senators (e.g. McConnell) and House members (e.g. Issa). This is the obstruction that is behind the scenes.

    I am still surprised President Obama has gotten as much done as he has. The wall of opposition I really think went and still goes deeper than most people know. Especially given that high crimes like the one’s the big banks pulled off take years to materialize and then prosecute, I could imagine how tough it might be to want to prosecute them but have to work around, over, and under anti-regulatory cronies who would just as assume keep the Bush administration policies going.

    • sigrid28

      Great post! It explains so much. Parts seem unbelievable, but I can believe what you say, as a veteran of the Chicago Board of Education. Whenever a new president took it over, the old administrators were simply cut out of work and new ones hired to do the jobs they used to perform. But since many of the old administrators had tenure, they would just sit in their offices doing nothing, all the while pulling down an administrative pay check.

      • Forcing everyone to buy Obamacare from Wall Street insurance companies owned by the big banks makes no sense at all.

        “Occupy” exactly what?

        Obamacare is a huge Wall Street bailout…

        “Default” is a huge lie… The debt ceiling is a built in budget balancer… Progressive Democrats and Progressive RINOs just don’t want to face the music…

        Quantitative easing is inflating the hollow Bronze Bull… if the Federal reserve cannot print more money, the bailout stops…

        • sigrid28

          Try to avoid stringing together Tea Party talking points. None of this has anything to do with the topic of the article or our conversation. You hate President Obama. We get it. Move on.

          • I don’t belong to a political party.

            Politically, I am Anonymous.

            Go fork yourself, you police state freak…

          • sigrid28

            Like I said. You hate President Obama. We get it. Move on.

          • No, you couldn’t get a Clue if you changed your name to Colonel Mustard, you police state poody panda…

          • sigrid28

            You have such cute obscenities. I bet even a Tea Party Republican like you missed the Panda cam from the National Zoo when you-all shut down the government, wasting $24 billion.

          • I don’t belong to a party…

            That is for you mindless drones.

  • Michael Kollmorgen

    IF this same thing happened in China, the CEO would be either executed or doing very severe hard labor in prison.

    • Independent1

      A lot of them that were in charge feel disgraced by having been caught and end up taking their own lives due to the shame they feel; not only in China but other Asian countries like Japan.

      • Lola Johnson

        Unfortunately, big business in this country has no shame.

        • Michael Kollmorgen

          We can harp all day long about how this country was designed by the people and for the people – all that goody-two stuff. But, in reality, this country was not designed “for the people”. It was designed for business purposes. It was business people who first came here scouting out places to settle and then use resources to ship back to their native countries, at of course a huge profit.

          In North America, they like they did in middle and south america, were looking for Gold, one was looking for the Fountain Of Youth.

          The people who came here later were mostly under servitude and actual slavery. They were more than likely duped into believing they were perusing freedom of religion only to find themselves in worse condition than if they stayed where they originally came from. They arrived here mostly broke and had no choice but to work under very severe conditions.

          Therefore, in this sort of situation, why should business have any shame in the first place.

    • RobertCHastings

      Michael, unfortunately (in some ways) this is not China and such things (again, unfortunately) do not happen to people who do such things. While our Justice Department could learn a few lessons from the Chinese, the prosecution of those at JPM, BofA,ML, etc.who eventuated the collapse of 2007 will take time and must follow the dictates of our Constitutional system. The banks themselves will not fail; however, those individuals behind the schemes that precipitated the collapse must, eventually, face the music. Glad to see Holder finally being able to do so.

      • Michael Kollmorgen

        Yea, I agree. The government had that capacity all along. The banks should have been fined, and by rights, their CEOs should have been put in prison long ago. At least that much.

        On a side note, I’ve noticed for years, when our economy takes a nosedive, people start to loose their homes, their jobs, these Check Cashing places start to grow like weeds. These sort of places can get you caught in a endless cycle that if you aren’t careful, they can sink you for good.

        There should be way more regulation and not allow so many to pop up as they now do.

        • RobertCHastings

          The check-cashing places are being regulated now more than in the pas. Unfortunately, for a lot of folks who live from paycheck to paycheck, they are stuck. The rates and terms are more subject to regulation, but they can still charge way too much. Usury has been a crime for decades, but these places thrive, as do credit card companies that,under certain conditions, still can charge usurious rates. It is amazing how we bitch about how Muslims are such bad people, but their religion prohibits them from loaning at interest, and it was one of the chief issues Jesus raised with the Temple in Jerusalem.

          • Allan Richardson

            The Bible also forbids lending at interest; of course, in those days loans were a form of assistance to the needy, and the most they could expect from someone who had to borrow because of personal hardship was to eventually repay the principal. No one was supposed to be in the “business” of lending. And all debts were to be forgiven in the Jubilee year, which occurred every 50 years, which had the unintended consequence of making loans harder to get as the Jubilee came closer.

            Later, when medieval Europe was awakening and businesses were being started, people borrowed to get capital for money making projects such as trading on the high seas. Since the Church had not made an exception to the Biblical rule for Christian businessmen, the Jews, who because of persecution had little else in the way of opportunity, and who interpreted the Biblical rule to allow lending at interest to Gentiles, began some of the earlier business-lending banks in Europe, which profligate kings and nobles patronized after suffering gambling losses (hence the plot of Shakespeare’s “Merchant of Venice”), leading to the VERY outdated stereotype of “greedy Jewish bankers.” In reality, kings who borrowed too much from these moneylenders usually launched a pogrom (or crusade) using Church teaching as an excuse, and wiped out their creditor’s entire village; no creditor, no debt.

            So today, people who need to borrow for personal emergencies are treated as if they had intended to start a business, with the profits going to pay the interest. Just the opposite of the problem in Renaissance Europe.

  • howa4x

    I think what happened here was that the DOJ did bring a criminal case against a Goldman-Sachs exec for criminal fraud and lost in front of a jury. This showed how murky the financial dealings really were and juries couldn’t understand the complex derivative market. Plus other issues started to bubble up for the administration and the DOJ spent time to consider what to do in the Madoff case, and the BP oil spill was grabbing headlines. I always thought that the DOJ should have pulled a RICO case against the all banks since they were involved in a criminal conspiracy. This way the ill gotten profits plus houses and yachts could have been confiscated, and that would have brought more attention from Wall st than a jail sentence

    • Allan Richardson

      Not to mention the defense attorneys challenging all potential jurors who had ever experienced credit problems, or been overcharged or foreclosed in error.

  • Jim Myers

    What is missing in this article is the input given by Elizabeth Warren.

    I have serious doubts that this would have proceeded without her “Bulldog” approach to the financial debacle that was thrust upon the American public, and by default, the bailouts that benefitted the perpetrators at the expense of the American taxpayers.

    We Americans will never be able to fully repay her for her devotion to weeding out the corruption that has become a way of life for the banking industry.

    • Forcing everyone to buy Obamacare from Wall Street insurance companies owned by the big banks makes no sense at all.

      “Occupy” exactly what?

      Obamacare is a huge Wall Street bailout…

  • Jim Myers

    For those of us who often read only the opinions of the comments in the lower section of this blog site, let me say, Jim Marzilli made a major contribution in his comments in the
    upper section of this blog site.

    Good job, Jim!

  • Mike Roddy

    He still hasn’t done anything about the legalization of Marijuana. And that’s reason enough to fire his ass.

    • RobertCHastings

      In some cases, inaction is a better indicator of the feelings of those in charge than action. Like abortion and same-sex marriage, drugs are a hot-button issue for conservatives. There are Democrats in the administration AND in Congress who are openly advocating ending the ridiculous (and totally lost) “War on Drugs” in favor of a policy of control and rehabilitation. This war is effectively a “No Tolerance” policy, which has been shown in other areas to be a bit stupid. By refusing to pursue and prosecute SOME aspects of the laws against controlled substances, the Obama administration is showing a willingness to pursue a more reasoned approach.