When Eric Holder told a Senate committee in March that federal prosecutors were reluctant to bring criminal charges against big banks, he confirmed what critics had asserted for years: The Justice Department would let those responsible for the financial crisis off the hook.
But the U.S. attorney general, who has indicated that he will step down soon, sent a very different signal in an interview with the Wall Street Journal published Tuesday.
"My message is, anybody who's inflicted damage on our financial markets should not be of the belief that they are out of the woods because of the passage of time," Holder said, according to the paper. "If any individual or if any institution is banking on waiting things out, they have to think again."
Holder's comments come in the wake of several moves that seem intended to burnish his legacy. In recent weeks, he has tightened rules on obtaining reporters’ data in leak cases and started an effort to strengthen protections for minority voters, after the Supreme Court struck down part of the Voting Rights Act of 1965. The move continued an assertive approach to voting rights and other civil rights enforcement throughout his tenure.
Now it appears Holder is attempting to bolster his argument that under his direction, the Justice Department did all it could to hold accountable those responsible for the mortgage crisis. This is a tough case to make. His agency has faced fierce criticism for not charging bank executives in federal cases, and for not bringing any criminal cases at all in nearly four years since the crash.
"Holder and the entire criminal division have to be somewhat embarrassed about what happened," Arthur Wilmarth, a law professor at George Washington University, said of the lack of criminal cases.
Holder declined to discuss specific cases in the Wall Street Journal interview, but the paper said he wouldn't leave office before making "major charging decisions." When reached for comment, a DOJ spokesman said, "As the attorney general has said on numerous occasions, the Justice Department takes financial fraud allegations seriously and investigates them aggressively. Further announcements will be made at the appropriate time."
Despite the new rhetoric, its not clear that the basic calculus has changed, legal experts say.
"It costs Holder nothing to engage in saber rattling," said Adam Pritchard, a securities law professor at the University of Michigan. "He's saying something different now, but that's not the same thing as doing something different."
In 2009, a federal jury acquitted two former Bear Stearns bond traders of fraud charges stemming from alleged lies told to investors about funds they managed. Since then, the Justice Department and the Securities and Exchange Commission, Wall Street's top regulator, have brought dozens of civil cases against banking institutions and employees.
Many of these cases, including one that recently resulted in a rare trial victory for the Securities and Exchange Commission, have dealt with bad information institutions gave to their clients about the true condition of the mortgage bonds they were peddling as the housing market was imploding.
But these cases, though sometimes resulting in settlements that cost the banks billions of dollars, have rarely targeted top bank officials. Crucially, in the eyes of critics, federal prosecutors have failed to follow up with any additional criminal cases after losing in the 2009 Bear Stearns trial.
There is, however, an indication that at least one such case is in the works. Earlier this month, JPMorgan Chase disclosed in a regulatory filing that it was facing a criminal investigation over its sale of mortgage securities.
The U.S. Attorney for the Eastern District of California has "preliminarily concluded" that the bank violated federal laws with its sale of subprime mortgages from 2005 to 2007, according to the disclosure.
One hurdle to bringing criminal cases is a five-year statute of limitations that would apply in most instances. Prosecutors in several recent cases have persuaded judges that they may use a once-obscure federal statute to extend that statute to 10 years.
But even if prosecutors do have a criminal case in the works, they would likely find it tough to make a compelling case given that so much time has passed, Pritchard said.
Criminal prosecutions depend on the state of mind of the alleged wrongdoer, Pritchard said. Statute of limitations exist for a reason -- the passage of time tends to erode memories, he said. It's been at least five years since the last of the mortgage instruments were created.
"If they had something, you would think they would have come up with it by now," he said.
This story has been updated with a comment from the DOJ.