Posted on 22 Aug 2013 by Neilson
Attorney General Eric Holder said the Justice Department is nearing decisions on a number of probes involving large financial firms and that he plans to announce new cases stemming from the economic meltdown in the coming months.
"My message is, anybody who's inflicted damage on our financial markets should not be of the belief that they are out of the woods because of the passage of time. If any individual or if any institution is banking on waiting things out, they have to think again," Mr. Holder said in an interview Tuesday with The Wall Street Journal.
Mr. Holder declined to discuss specifics or say when such cases would be announced, but he indicated his own career schedule wouldn't affect those decisions. Mr. Holder has previously said he doesn't plan to serve through the end of the Obama administration. In Tuesday's interview, he said he wouldn't leave the job before making major charging decisions on cases stemming from the financial collapse. According to associates, he could step down later this year.
"I expect to be here to announce a series of significant matters that we'll be bringing," he said.
Mr. Holder and the Obama administration have faced growing criticism, particularly from fellow Democrats, for not bringing criminal charges against any senior executives over the 2008 market meltdown. On Tuesday, Mr. Holder wouldn't say whether any new cases would be civil or criminal but said his department would pursue whichever type of case was most likely to work in court.
John Coffee, a law professor at Columbia University who studies white-collar crime and securities fraud, said the Obama administration "has been appropriately criticized for being excessively equivocal and slow to respond" to the financial crisis. But he said Mr. Holder's remarks suggest "he is responding to the temper of the times."
Nevertheless, Mr. Coffee said he expects the five-year statute of limitations on many white-collar crimes may bar a successful prosecution of a number of precrash abuses.
In recent days, disclosures have shown the federal government is pursuing new prosecutions of possible abuses in the mortgage-backed securities industry. The explosive growth of that industry helped fuel the housing bubble, which led to a credit crisis when the bubble popped and financial institutions were left holding securities that had plunged in value.
Earlier this year, the Justice Department sued Standard & Poor's Ratings Services and parent McGraw Hill Financial Inc. (MHFI) over mortgage-bond ratings, saying the firm misled investors. The company has denied the charges and is fighting the case.
The new crop of cases isn't limited to pre-meltdown activity. Federal prosecutors also recently filed criminal charges against two ex-J.P. Morgan Chase & Co. (JPM) traders, accusing them of misstating losses in a series of bad bets that eventually cost the bank more than $6 billion last year.
Mr. Holder, in the interview, said a number of cases are coming to a head now, in part because they are complicated, and in part because he has been urging prosecutors to complete their investigations.
"These are complex cases that require enormous amounts of effort to put together, but we are at a point--as you've seen, I think, recently--where the results of that difficult work is starting to bear fruit," he said.
Over the past year, according to Justice Department officials, prosecutors have made progress in their probes of residential mortgage-backed securities, in part because of increased pressure from the top of the Justice Department.
Mr. Holder said his marching orders to prosecutors around the country have been clear and forceful: "Remain aggressive and pursue these kinds of cases."
Asked about J.P. Morgan and its chief executive, James Dimon, Mr. Holder declined to discuss specific cases, but added, "No individual, no company is above the law. We don't investigate companies based on who a CEO is, but we don't avoid investigating companies based on who the CEO is, either."
According to public filings and officials familiar with individual investigations, J.P. Morgan faces at least seven government probes of its conduct, on issues ranging from mortgage-backed securities during the housing boom to a criminal probe of alleged manipulation of the energy market in California and the Midwest. J.P. Morgan has declined to comment on the mortgage-backed securities case or the energy matter.
Rep. Dan Kildee, a freshman Democratic lawmaker from Michigan who had urged the Justice Department to investigate J.P. Morgan's role in the energy market, said he was encouraged by the attorney general's statements. "If we are going to return integrity to the financial industry and the financial system, we have to be sure there are standards the people in the industry will be held to and, if there is criminal wrongdoing, people will be held accountable," said Mr. Kildee.