Holder Testifies Some Banks Are Too Big to Jail

During a critical congressional testimony before the Senate Judiciary Committee on March 6, 2013, Attorney General Eric Holder revealed the Department of Justice’s emerging doctrine of ’too big to jail’, acknowledging that prosecuting certain financial institutions could potentially destabilize the national and global economy. This testimony marked a pivotal moment in post-financial crisis regulatory approach, where massive banks were effectively shielded from criminal prosecution due to their systemic economic importance.

Testimony Details

In response to Senator Chuck Grassley (R-Iowa), who expressed concern about a “mentality of ’too big to jail’ in the financial sector, spreading from fraud cases to terrorist financing to money laundering cases,” Holder stated: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.”

Reactions and Context

Senator Charles Grassley described Holder’s remarks as “Stunning,” saying “After hearing today’s testimony, big bankers know that if they commit financial crimes, they can expect a passive response from the Justice Department.” Senator Sherrod Brown (D-Ohio) tweeted that he was “shocked by AG Holder’s statement that megabanks are too big to jail.”

Holder’s comments followed news of the Justice Department’s $1.9 billion settlement with HSBC concerning charges of money laundering related to terrorist financing and drug trafficking; the Justice Department chose not to prosecute the bank or any of its employees.

In May 2013, Holder sought to walk back his comments, telling lawmakers: “Let me be very, very, very clear. Banks are not too big to jail.” However, to that date, no Wall Street executive had been prosecuted for fraud in connection with the financial crisis.