Holder Sends A Stern Message To Bad Banks

On Monday, Attorney General Eric Holder offered a tense warning to banks being investigated for alleged illegal activities, speaking in a weekly video from the Department of Justice: "There is no such thing as too big to jail." Holder, who has served as AG for the entire tenure of President Obama's administration, made the remark in the midst expectation that the Justice Department will soon complete investigations into two titans of banking, Credit Suisse and BNP Paribas. It's believed the former could face charges for helping Americans set up illegal tax shelters, while the latter could face charges for violations of U.S. sanctions against countries like Iran and Sudan.

Considering how long activists have labored to turn public and legal focus to banks in the aftermath of the financial crisis of 2008, Holder's words are likely sweet music. But it begs the question: Why is Holder talking tough about it now — when, for years, activists have called for stronger regulations on banks, and criminal penalties for their wrongdoings?

Well, it could be that the political ease of doing so is magnified by the nature of the rumored charges against BNP Paribas and Credit Suisse, and the nature of the banks themselves. Doing business with sanctioned countries immediately paints an anti-American image that's ripe for Holder's criticism, as does setting up hidden tax havens. And to boot, both banks are foreign-based, from France and Switzerland respectively.

Which all means that these charges, as much as is possible in a global economy, would still be somewhat insulated from the American banking system, and would be brought against attractive political targets. It's almost surely an easier lift than taking on the highly-complex, intricate and often-arcane issues which under-regulated American banks present to the DoJ.

As currently outlined, the potential charges could likely be addressed narrowly enough to avoid triggering what Holder clearly fears — a big, chaotic reaction in the banking industry that compromises the financial sector writ large. In spite of his stated worry about such an outcome, his enthusiasm for cooperative oversight between prosecutors and regulators was stated plainly.

But rather than wall off banks from prosecution, the potential for such severe consequences simply means that federal prosecutors conducting these investigations must go the extra mile to coordinate closely with the regulators that oversee these institutions' day-to-day operations.

As for major charges against American banks, well, we're still all waiting on those.