With Attorney General Eric Holder’s departure from Washington, critics say Wall Street is losing someone who has essentially given the industry a pass on the excesses that led to the financial crisis. In another potential wrinkle for Wall Street, two of the leading candidates who could follow in Holder’s footsteps both have a history of ruffling feathers in the financial industry.
Critics of Wall Street have slammed Holder for not prosecuting top executives during his time leading the Department of Justice. A Democratic operative who spoke to Business Insider about Holder’s time as attorney general called his lack of financial industry prosecutions “bizarre,” particularly in light of the fact “this administration entered office during the middle of the worst financial crisis since the great depression.”
“He could not have been more of a disappointment in terms of dealing with the issues that led to the collapse of the financial markets and the global economy,” the operative said of Holder. “He had an opportunity and, frankly, a responsibility to say there was a whole host of systemically illegal and improper behaviour and to go after it.”
Holder, whose office did not respond to a request for comment on this story from Business Insider, attempted to address this criticism at a congressional hearing last year. At the hearing, Holder argued it was dangerous to impose overly harsh penalties on leaders of financial institutions because it could have a negative impact on the economy.
“The size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy,” Holder said.
However, this explanation has not satisfied those who argue Holder has been far too soft on the financial industry. The Democratic operative who discussed the attorney general with Business Insider argued Holder’s comments were a weak excuse for a “dereliction of duty.”
“He, for some reason, believed that he was on the board of these banks and their long term stability was part of his job,” said the operative. “For some bizarre reason, he said — it was on record — that he was considering the health of those financial institutions and the broader economy when he was considering those cases. And that was totally inappropriate and, frankly, a dereliction of duty.”
Critics of Holder’s perceived inaction with respect to Wall Street include elected officials of both parties. At a Senate hearing earlier this month Sens. Elizabeth Warren (D-Massachusetts) and Richard Shelby (R-Alabama) both questioned why the crisis led the DOJ to pursue settlements against financial institutions, but not criminal prosecutions against individual executives.
“No corporation can break the law unless the individual within that corporation broke the law,” Warren said. “Not a single senior executive at these banks have been criminally prosecuted.”
“Something’s wrong with the Justice Department. People shouldn’t be able to … buy their way out of culpability,” Shelby added.
Holder served throughout President Barack Obama’s time in the White House. The Democratic operative argued that, even if Obama chose to take a more gentle approach toward the financial industry, Holder had an obligation to take action.
“I believe the president has failed in this area … but he is a policy maker the president so … he does have broader economic considerations to make,” the operative said, arguing Obama has a better excuse than Holder for being concerned about the health of financial institutions. “But it is not the Attorney General’s job to consider those things when deciding who to prosecute or not or what remedies to pursue.”
With Holder set to resign, those who hoped to see the DOJ get tougher on Wall Street might see signs the next attorney general could address their concerns.
According to many insiders, Labour Secretary Tom Perez is a frontrunner to get the nomination from Obama. In his morning political briefing Friday, analyst Greg Valliere of the Potomac Research Group argued Perez is the “is the logical pick” and noted “he’s already been confirmed by the Senate.” Another Democratic strategist who spoke to Business Insider said Perez’s Dominican heritage was fueling rumours he would be Obama’s choice to succeed Holder.
“People in Washington, people in the White House are buzzing that the president is favouring picking a Latino for the position of attorney general and, specifically, favouring picking Tom Perez,” the strategist said.
The Democratic operative said Perez was the only potential pick they have heard credible chatter about.
“I’m hearing all Perez,” they said.
“He’s proved he’s got consumers’ back at the DOL and I guess, if you’re Wall Street that might be a bad thing,” said the strategist. “But if youre 99% of people, that’s a good thing.”
However, the Democratic strategist argued the financial industry has nothing to fear from Perez. They characterised him as a “consensus builder” who knew it was important to get “business behind him” on these potentially contentious issues. They also suggested he would have a similar approach to Holder.
“Perez is exceptionally close to Eric Holder and would probably adopt the same style,” said the strategist.
Of course, President Obama is already halfway through his second term and polls show Democrat Hillary Clinton leading the 2016 field. And one person who is often discussed as a potential attorney general pick for Clinton is US Attorney Preet Bharara, who has earned a reputation as taking an aggressive approach on corporate crime. In fact, according to the New York Post, some Wall Streeters are already concerned Bharara could also be tapped by Obama to lead the DOJ.
Both of the Democrats who spoke to Business Insider argued Bharara’s habit of ending up with his name in the headlines makes him an unlikely choice for Obama. However, the operative suggested Bharara’s past experience as chief counsel to Sen. Chuck Schumer (D-New York), who worked alongside Clinton during her time representing New York in the Senate, could make him her pick.
“Very clearly he’s angling to be her attorney general,” the operative said of Bharara and Clinton. “Obviously Chuck is a big fan. Obviously, Hillary is well-versed in doing things to keep Chuck happy rather than be harrassed and irritated, so I’d imagine he could be her choice.”
However, despite Bharara’s reputation for being tough on Wall Street, multiple Democrats who have previously talked to Business Insider about the possibility he could lead the DOJ under Clinton argued he has only prosecuted small targets rather than leading financial industry executives. The strategist who discussed Perez with Business Insider argued Bharara’s record with regard to the Street is largely “superficial.” The other operative suggested this might actually add to Bharara’s appeal for Clinton.
“For Hillary, it could make sense,” said the operative. “He would give the appearance of reform and aggression against big actors without actually carrying it out.”
Overall, many critics on the left seem pessimistic the Department of Justice will ever really get tough on Wall Street.
“I don’t think Wall Street has anything to fear from a Hillary Clinton administration,” the operative said, adding, “The previous six years should make clear to Wall Street that they have nothing to fear at all.”
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