Uncle Sam's crackdown on Wall Street criminals

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After years of accusations that it has "coddled Wall Street criminals," the government may finally be getting serious about going after lawbreaking executives, said Matt Apuzzo and Ben Protess at The New York Times. The Justice Department issued new policies last week that will prioritize the prosecution of individuals, not just their companies, in white-collar crime cases. More significantly, companies will not get credit for cooperating with government investigations unless they identify individual wrongdoers and turn over evidence against them. Since credit for cooperation can help companies save billions of dollars in fines, as well as avoid criminal charges, the rule change may prove effective in getting firms to cough up misbehaving bankers and their bosses. "Corporations can only commit crimes through flesh-and-blood people," Deputy Attorney General Sally Yates wrote in a memo announcing the new policies. "It's only fair that the people who are responsible for committing those crimes be held accountable."

It's about time, said William Cohan, also at The New York Times. For too long, the Justice Department has treated Wall Street executives as "too big to jail," shying away from criminal prosecutions for fear of destabilizing the financial system, or harming innocent shareholders and employees. Prosecutors have instead focused on wringing billions of dollars in fines from big banks for corporate misdeeds. Former Attorney General Eric Holder outlined this approach in a 1999 memo written when he was deputy attorney general, and the "Holder Doctrine" is the reason no Wall Street banker of any significance has been prosecuted since the financial crisis. "That's not a legacy of which to be proud." It's depressing that this memo had to be written in the first place, said Jordan Weissmann at Slate. The question is, Will banks just pin blame on the "lowest-level schmuck" they can find, "or are prosecutors going to demand the scalp of an executive or two?"

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Surely it must be a coincidence that the statute of limitations has expired on financial crisis-related crimes, said Barry Ritholtz at BloombergView. "Pardon my cynicism," but after prosecutors passed on "the most target-rich environment for white-collar prosecution ever," I need to see more than a memo to convince me the feds are serious. Even with the best intentions, prosecutors have their work cut out for them, said Daniel Fisher at Forbes. CEOs are well insulated from the day-to-day doings of their underlings, even if they encourage lawbreaking by, say, setting profit goals that are impossible to achieve without cutting corners. They're also careful not to sign any document that will come back to haunt them in court. The "uncomfortable truth" is that execs can do things "that look sleazy as hell" without technically breaking the law.

"The public has become hardened and cynical," said Sheelah Kolhatkar at Bloomberg. But this memo is a remarkable concession by the Justice Department that "there was a big problem with how it did things before." Now we'll need to see actual cases to prove there's a new sheriff in town. Even if the worst villains of the financial crisis have slipped away, there's always more to do. "Wall Street is like the Silicon Valley of financial crime: It's always innovating."