Ties that bind

WASHINGTON, D.C.-In 2009, U.S. Attorney General Eric Holder, on behalf of the Department of Justice, pledged to usher in a new era of accountability in big finance: "We will be relentless in our investigation of corporate and financial wrongdoing, and will not hesitate to bring charges, where appropriate, for criminal misconduct on the part of businesses and business executives."

Those "relentless" efforts are yielding fewer and fewer results. According to the Transactional Records Access Clearinghouse at Syracuse University, federal prosecutions for fraud in the financial sector are down to one-third of what they were a decade ago-even in the aftermath of one of the largest financial collapses in U.S. history.

Furthermore, the Government Accountability Institute (GAI) released a report this month that chronicles, among other things, how the Department of Justice (DOJ) has failed to prosecute a single top executive from elite financial institutions (download a PDF of the report). The DOJ continued the trend when it recently announced no charges would be brought against Goldman Sachs or its employees for playing a role in the 2008 financial meltdown.

Last year, Sens. Carl Levin, D-Mich., and Tom Coburn, R-Okla., the top two members on the Senate Permanent Subcommittee on Investigations, called for a criminal investigation after releasing a 635-page report on what went wrong leading up to the collapse.

"The free market has helped make America great, but it only functions when people deal with each other honestly and transparently," Coburn said. "At the heart of the financial crisis were unresolved, and often undisclosed, conflicts of interest."

Levin said the investigation turned up a "financial snake pit rife with greed, conflicts of interest, and wrongdoing."

Yet, after the DOJ conducted an "exhaustive" review of the Levin-Coburn report, it said there wasn't enough evidence to bring convictions. Levin sharply disagreed with the decision, reiterating his charge that Goldman Sachs' actions were "deceptive and immoral."

In search of possible answers to the DOJ's soft enforcement policy, the GAI report documents the difference between Holder's job as the nation's chief prosecutor and his former position at an international law firm. Before becoming attorney general, Holder spent a decade as a defense attorney at Covington & Burling, a 93-year-old firm that represents Wells Fargo, J.P. Morgan Chase, Bank of America, Citibank, ING, Morgan Stanley, UBS, Deutsche Bank, and Goldman Sachs (whose employees were a top source of private funding in Barack Obama's 2008 presidential campaign).

The report also notes that Deputy Attorney General James Cole, Associate Attorneys General Thomas Perrelli and Tony West, and others have been-and have gone back to being-attorneys at white-collar defense firms that represent the institutions the DOJ must investigate.

Holder's tough rhetoric played well in the aftermath of the financial crisis, but his agency's inaction render his 2009 words more hollow every day: "To those who see the victimization of others as an avenue to wealth take notice: If you fabricate a financial statement, if you propagate an investment scheme, if you are complicit in an act of financial fraud, you are writing your ticket to jail."

Levin, a Democrat, believes Dodd-Frank-the over-burdensome 2010 financial regulation overhaul-is the answer, but Holder would do better to enforce the laws already on the books.