The recent comments by U.S. Attorney General Eric Holder that the criminal prosecution of executives at the nation's major banks could lead to the wreckage of the global economy was openly challenged by the Independent Community Bankers of America (ICBA), the trade group representing the nation's smaller banks.
‘ICBA and the nation's community banks want answers on why Wall Street financial institutions should be allowed to operate above the law,’ says Camden R. Fine, president and CEO for the trade group. ‘Holder's statement that the size of these too-big-to-fail institutions has prevented the Justice Department from enforcing the law shows that these systemically dangerous mega-banks receive favorable treatment from both regulators and law enforcers.
‘While community banks are accountable to regulators, market forces and the law, the mega-banks apparently are held to a different standard,’ Fine continues. ‘Their too-big-to-fail status provides them a taxpayer-funded guarantee against failure, while their interconnectedness in the financial system appears to ensure that they are also considered too big to jail. While the nation's community banks have helped communities across the nation begin to recover from the Wall Street financial crisis of 2008-2010, the mega-banks are allowed to continue operating as if the crisis they caused never happened. Not only should they be held accountable, they should also be downsized and split up to help restore sanity to our financial system. Only then can we ensure that all financial institutions are held to the same legal and regulatory standards.’
Holder, in a March 6 appearance before the Senate Judiciary Committee, sought to defend his department's failure to prosecute the banking executives at the core of the 2008 crash by claiming that such prosecution would set off a lethal economic domino effect.
‘I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them,’ said Holder. ‘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.’
Holder did not cite specific cases in which his department deferred court action based on the ‘too big to fail’ principle, nor did he explain how the criminal prosecution of an individual executive could ultimately wreck the economy. However, he claimed that federal prosecutors were ‘as aggressive as they could be [and] brought cases where we think we could have brought them.’
Holder's comments created outrage among several elected officials. Sen. Chuck Grassley, R-Iowa, issued a statement that slammed Holder's comments as ‘stunning,’ while Sens. Mark Warner, D-Va., and Bob Corker, R-Tenn., sent Holder a letter questioning whether larger financial institutions were ‘above prosecution.’
‘Like many of our colleagues, we believe that criminal behavior at any institution ought to be prosecuted and responsible parties held accountable,’ the senators wrote.