Eric Holder’s time as attorney general will be remembered for many things, most recently his forceful response to the upheaval that followed a police shooting of an unarmed black man in Ferguson, Mo. On Wall Street, however, he will always be the guy who extracted billions of dollars in settlements from banks.
As he has been hinting for several months, Holder intends to resign his post as attorney general, although he plans to remain in office until his successor is fully in place. “Attorney General Holder has discussed his plans personally with the president on multiple occasions in recent months, and finalized those plans in an hour-long conversation with the president at the White House residence over Labor Day weekend,” according to an official at the Justice Department who was quoted in news reports.
In 1999, when Holder was deputy attorney general under President Clinton, he wrote a now-infamous memo (pdf) outlining guidelines for bringing criminal charges against corporations, in which he argued that companies should be treated no differently than individuals. He added this precedent-setting caveat, however: “Prosecutors may consider the collateral consequences of a corporate criminal conviction in determining whether to charge the corporation with a criminal offense.” He went on: “prosecutors may take into account the possibly substantial consequences to a corporation’s officers, directors, employees, and shareholders.” And: “Virtually every conviction of a corporation, like virtually every conviction of an individual, will have an impact on innocent third parties.” He was basically saying that the government should hesitate before charging companies with committing a crime, because it could hurt innocent bystanders.
When Holder was appointed attorney general by President Obama in 2009, he was dropped right into the esophagus of the financial crisis, and those words came back to haunt him. As months slid by, during which taxpayers funded rescues of financial institutions and millions lost their livelihoods and homes, public rage built about companies and people implicated in the crisis not paying a price.
In March of last year, Holder seemed to reiterate his earlier point when he told the Senate Judiciary Committee: “I am concerned that the size of some of these institutions becomes so large that it does become difficult to prosecute them.” Only a few months later, after much criticism, he revised his statement, saying, “There is no such thing as ‘too big to jail.’ No individual or company, no matter how large or how profitable, is above the law.”
No one was actually jailed in the end. What followed were a handful of eye-popping, multibillion-dollar (mostly) civil settlements with many of the country’s biggest banks. In August, Bank of America (BAC) agreed to pay $16.65 billion to the DOJ and other agencies over the bank’s role selling toxic mortgages prior to the financial crisis. In July, Citigroup (C) agreed to pay $7 billion, and last November, JPMorgan Chase (JPM) agreed to pay $13 billion to resolve their own mortgage fraud investigations. In total, the Justice Department says it has extracted almost $37 billion from banks in mortgage settlements. The DOJ did force two foreign banks,BNP Paribas (BNP) and Credit Suisse (CS), to plead guilty to criminal charges of violating U.S. sanctions and helping Americans avoid taxes, respectively. They also paid enormous fines.
Ultimately, though, critics who wanted to see individuals threatened with prison sentences for committing financial crisis-related fraud were disappointed by the Holder era. Instead, it was bank shareholders who ended up paying for their companies’ misdeeds, while the individuals who committed them, and made millions in bonuses while doing so, went on with their lives.