Cole Out, Raman In for House Hearing on Too Big to Fail

First he was scheduled to testify.

Then he wasn’t.

Deputy Attorney General James Cole was scheduled to testify tomorrow before the House Financial Services’ Oversight and Investigations Committee.

The title of the hearing — “Who Is Too Big to Fail: Are Large Financial Institutions Immune from Federal Prosecution?”

A subcommittee spokesperson told Corporate Crime Reporter that on April 27, Cole was invited to testify.

“We were not informed by the Department of Justice until Friday, May 17 – three business days before the hearing is scheduled – that Cole would not be available to testify,” the spokesperson said.

“You’ll hear the subcommittee chairman, Congressman Patrick McHenry, talk about this tomorrow at the hearing,” the spokesperson said.

“Since Department of Justice has told us Cole is unavailable, we will have Mythili Raman, Acting Assistant Attorney General, testifying instead.”

Attorney General Eric Holder has said that the Justice Department relies on “outside experts” when assessing the economic harm that might result if it prosecutes large financial institutions, and that the Justice Department’s assessment of that harm has inhibited it from prosecuting such institutions.

But in a memo dated May 17, the subcommittee staff reported that it had been “unable to find evidence that the Justice Department has received any material information from ‘outside experts’ when making prosecutorial decisions in cases involving large financial institutions.”

And in a Thursday, May 16th letter responding to a request that the Committee made over a month earlier, the Justice Department said that ‘we are not currently aware . . . of any consultations with private, non-governmental third party entities on the potential collateral consequences of prosecutorial actions the Department might take with respect to any large, complex financial institutions” and that the Department has from time to time “contacted relevant

government agencies to discuss such issues,” including domestic and foreign regulators.

But the Subcommittee determined that the Treasury Department did not offer advice to the Justice Department in at least one prominent matter involving HSBC Holdings plc and HSBC Bank USA,, because the Treasury Department “did not conduct any economic analysis” regarding the potential prosecution of those entities.

The Subcommittee staff also found that the Justice Department did not receive any analyses from the Financial Stability Oversight Council (FSOC) or the Office of Financial Research (OFR) about the HSBC matter, even though the Dodd-Frank Act charges these  agencies with assessing risks to the financial system and coordinating among federal regulators.

The Subcommittee also determined that the Justice Department did not receive analyses from the OCC or the Federal Reserve regarding the economic effect of prosecuting HSBC, although the Justice Department did consult them on other matters relating to HSBC.

The hearing will examine the appropriateness and adequacy of the Justice Department’s opinions about the collateral consequences of prosecuting large financial institutions, the Justice Department’s ability to assess the economic consequences of such prosecutions, and whether an institution’s “Too Big to Fail” status has prevented the Justice Department from appropriately resolving criminal matters.

Dennis Kelleher of the public interest group Better Markets told Corporate Crime Reporter that “nothing is more fundamental to America than equal justice before the law.”

“There cannot be a double standard where the law applies to everyone except Wall Street’s too-big-to-fail banks,” Kelleher said.  “If the Department of Justice is to be worthy of its name, it has to start prosecuting the high crime area of Wall Street. Statements and pronouncements by the Attorney General or anyone else are meaningless. Only concrete action that holds Wall Street accountable before the court of law will prove that there is no such thing as too-big-to-jail.”

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