In the letter [PDF], the senators say that even though banks have already paid out billions in civil and regulatory penalties, these settlements are nothing compared to the scope of the damage done, the money banks made before the economy went kaplooey, and the taxpayer investment in the TARP bail-outs.
“Unfortunately, many of the settlements between large financial institutions and the federal government involve penalties that are disproportionately low, both in relation to the profits which resulted from those wrongful actions as well as in relation to the costs imposed upon consumers, investors, and the market,” reads the letter.
Grassley and Brown voice their concerns that prosecutors’ treatment of the bank has left the impression with Americans that “Wall Street banks enjoy a favored status, in statute and in enforcement policy.”
They point to comments made by Assistant Attorney General Lanny Breuer, the one who has not brought a single criminal prosecution against a high-ranking bank employee, on the recent Frontline, in which Breuer discussed why he loses sleep at night when he thinks about the possible ramifications of prosecuting a big bank.
“[I]f I bring the case against Institution A and as a result of that case there’s some huge economic effect,” said Breuer, “If it creates a ripple effect so that suddenly counter-parties and other financial institutions or other companies that have nothing to do with this are affected badly, it’s a factor we need to know and understand.”
“These statements raise important questions,” write the Senators, who then proceed to ask AG Holder the following:
1. Has the Justice Department designated certain institutions whose failure could jeopardize the stability of the financial markets and are thus, “too big to jail”? If so, please name them.
2. Has the Justice Dept. ever failed to bring a prosecution against an institution due to concern that their failure could jeopardize financial markets?
3. Are there entities the Justice Dept. has entered into settlements with, in which the amount of the settlement reflected a concern that markets could be impacted by such a settlement? If so, for which entities?
The letter also asks Holder to identify all outside experts consulted by the DOJ with regard to any prosecutorial decisions involving a financial institution with more than $1 billion in assets.
The Washington Post points out that this request is likely in response not only to Breuer’s statements, but a comment made by Holder when he announced the $1.5 billion settlement with UBS for Libor price-fixing.
“We reach out to experts outside of the Justice Department to talk about what are the consequences of actions that we might take, what would be the impact of those actions if we want to make particular prosecutive decisions or determinations with regard to a particular institution,” said the AG at the time.
The letter requests that Holder respond to Grassley and Brown’s questions by Feb. 8.
“Our markets will only function efficiently if participants believe that all laws will be enforced consistently, and that violators will be punished to the full extent of the law,” write the senators. “There should not be one set of rules that apply to Wall Street and another set for the rest of us.”