Elizabeth Warren: Why Aren't Any Bankers in Jail?

By Joseph Lawler, Washington Examiner

11 September 14

en. Elizabeth Warren and other senators confronted regulators Tuesday over the fact that no top bankers are in jail.

Warren launched into an extended criticism of regulators at a Senate hearing after Federal Reserve Governor Daniel Tarullo said that he didn’t know whether his agency had referred any bank executives to the Justice Department for criminal prosecution. Despite the lack of prosecutions, federal agencies have received billions of dollars in settlements and admissions of wrongdoing from big banks over failed mortgages involved in the financial crisis.

“After the savings and loans crisis, the government brought over 1,000 criminal prosecutions and got over 800 convictions,” in part because of regulators’ referrals, Warren said.

“The main reason we publish illegal behavior is for deterrence to make sure that the next banker who’s thinking about breaking the law remembers that the guy down the hall was hauled out in handcuffs when he did that,” she said. Civil cases against companies, Warren said, don’t provide the same message.

“The message to every Wall Street banker is loud and clear: If you break the law, you are not going to jail, but you might end up with a bigger paycheck,” Warren added, referring to the bonus JPMorgan Chase CEO Jamie Dimon received after negotiating a settlement with the government over crisis-related mortgages.

Sen. Richard Shelby, the Alabama Republican who could become the Banking Committee chairman if the GOP takes control of the Senate in November, agreed with Warren’s criticism of the Obama administration for failing to prosecute individual bankers. But he placed the blame on the Department of Justice, rather than regulatory agencies like the Fed or the Federal Deposit Insurance Corporation.

“Something’s wrong with the Justice Department. People shouldn't be able … to buy their way out of culpability,” Shelby said.

In the case of settlements with banks over mortgages that haven’t involved prosecutions of individuals, Shelby said, “ultimately it seems the Justice Department is bent on money, not on justice.”

Following a nearly $17 billion settlement with Bank of America in August, the Obama administration’s mortgage task force has claimed $36.65 billion in settlements over mortgages involved in the financial crisis. Warren said at Tuesday’s hearing that the three biggest U.S. banks, JPMorgan Chase, Bank of America and Citigroup, have accounted for roughly $35 billion of those settlements.

In recent weeks, Warren has had some apparent success in influencing bank regulators through confrontations at congressional hearings.

After Fed Chairwoman Janet Yellen was confronted by Warren and Rep. Patrick McHenry, R-N.C., at hearings in July over big banks’ living wills, the Fed and FDIC subsequently demanded that the banks revise and improve the documents. The living wills are required of financial institutions considered systemically important to clarify in advance how they would go through bankruptcy during a crisis without threatening the rest of the financial system.

Warren and other senators continued to press Tarullo and FDIC Chairman Martin Gruenberg Tuesday to push banks to write credible living wills or else use the power granted to the agencies by the 2010 Dodd-Frank financial law to crack down on the banks.

“We really need to keep a fire lit under this,” Sen. Mark Warner, D-Va., said of the living will process. If regulators fail to force banks to provide credible plans for winding their operations down, Warner said, “I wonder if we really got it right [with the Dodd-Frank law] in terms of ending ‘too big to fail.'"