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Why so few sketchy bankers are behind bars

When future historians write about Attorney General Eric Holder's tenure leading the U.S. Department of Justice, one topic sure to get much discussion is why no high-ranking bankers connected to the financial crisis received criminal charges. It's a question that legal experts say has no easy answer.

Eric Holder's legacy as attorney general 02:29

Under Holder's leadership, Justice has collected billions in fines through civil actions and has gotten two banks to plead guilty to criminal charges, but bringing charges against top Wall Street executives, which Holder says hasn't been ruled out, won't be easy.

For one thing, to charge someone with a criminal offense, prosecutors have to prove criminal intent, something that may be far more difficult in the case of the worst financial collapse since the Great Depression than people may think. Incompetence and stupidity, even though they cost billions of dollars, are not necessarily illegal.

"Almost everyone drank the Kool-Aid," said Jennifer Arlen, a professor of law at New York University who's also an economist, in an interview with CBS MoneyWatch. "Many people accepted the preposterous idea that real estate prices would continue to go up. ... That actually makes many of these frauds more difficult to prove."

DOJ: Bank of America to pay $17 billion settlement in mortgage case 02:02

However, as U.S. District Judge Jed Rakoff noted, other financial crises such as the savings-and-loan scandals of the 1980s and the dot-com bubble of the 1990s led to criminal prosecutions of top-ranking executives, including CEOs such as Enron's Jeffrey Skilling and Worldcom's Bernard Ebbers.


"Attorney General Eric Holder's record was badly blemished by his nearly overwhelming failure to hold corporate criminals accountable," said Public Citizen President Robert Weissman in a press release. "Holder came into office in the immediate aftermath of a devastating financial crisis caused by an epidemic of corporate crime and wrongdoing. Five years later, he has failed utterly to hold the perpetrators of the crisis accountable. 'Too big to jail' became de facto policy, as the U.S. Department of Justice declined to prosecute or even seriously investigate the Wall Street banks or their CEOs who crashed our economy and devastated communities across the country.
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In an interview, Weissman argued that the government was far too cozy with Wall Street, a sentiment that many critics share. He added that many Americans remain irate over the financial crisis, which had devastating consequences for millions of people. According to a 2012 paper from the Federal Reserve Bank of St. Louis, between 2007 and 2009 household wealth declined by almost $17 trillion when adjusted for inflation.

Experts are divided on the question about whether the high civil fines will deter future bankers from wrongdoing. Georgetown Law Professor Donald Langevoort argues that it will have a deterrent, though it will be less "dramatic" than if an executive would have gone to jail.

"The common impression is that you have to scare the executives, not just the firm," he wrote in an email. "I get the point, but can't imagine an executive who doesn't care a bit about the risk of a $200 million fine or penalty, even if it's not out of his own pockets."

If a criminal case involving high-ranking bankers ever occurs, and many experts are skeptical about that, prosecutors would face questions about statutes of limitations, the time they have to bring charges after an offense happens. Generally, speaking it's five years, though it can vary depending on the statute involved.

"It'll definitely come up, and then there will be arguments in court over when DOJ 'should' have known about the wrongs having occurred (since that's when the clock starts running)," wrote Cornell Law School professor Robert C. Hockett.

The Justice Department has repeatedly denied that it has gone soft on Wall Street. Between 2009 and 2013, it brought more than 4,000 cases of mortgage fraud. However, Holder stunned many observers when he decided not file criminal charges against Angelo Mozilo, the longtime CEO of Countrywide Financial, which became synonymous with the mortgage market excesses many argue were a leading cause of the financial meltdown.

Mozilo, who earned $535 million in compensation from 1999 to 2008, was accused of misleading investors about the quality of Countrywide's loans that were bundled and sold as securities. He has denied wrongdoing. However, Bank of America (BAC), which bought Countrywide in 2008, has paid more than $50 billion in fines since 2010, most of which were because of the acquisition. A Justice Department spokesperson had no immediate comment for this story.

One factor at play in this issue is Congress. Despite public statements vowing to get tough on corporate crime, legislators have failed to give the Department of Justice and other law enforcement agencies enough money to do the job. Resources instead went to other high-profile cases, such as the insider trading investigations against SAC Capital and Galleon, which experts say are easier to prove than a complex case related to the financial crisis.

"Having denied all federal regulators the resources necessary to go after a wide range of cases, Congress has essentially forced a form of triage -- choosing what to go after first as a priority," wrote Georgetown's Langevoort in an email. "And that can result in running out of time before you get around (if ever) to investigating your lower-priority cases."

NYU's Arlen, who teaches a course on financial crime, has an even harsher assessment.

"This is the game that Congress has always played with these cases," she said. "It's a bait-and-switch with the American public." Still, to many minds Attorney General Holder is where the blame gets laid for the lack of bankers behind bars.

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