Lanny Breuer: Financial Fraud Has Not Gone Unpunished

Lanny Breuer serves as assistant attorney general for the Department of Justice’s Criminal Division. He told FRONTLINE that when fraud from the financial crisis has been detected, the Department of Justice has pursued charges. “But when we cannot prove beyond a reasonable doubt that there was criminal intent, then we have a constitutional duty not to bring those cases,” Breuer said. This is the edited transcript of an interview conducted on Nov. 30, 2012.

In September 2009, you met with Sen. Ted Kaufman [D-Del.] and his staff, and they asked you what you were doing. They were concerned that you were not being aggressive enough. How did you respond to them?
Sen. Kaufman and I had a great partnership, and I visited with Sen. Kaufman repeatedly. And what I told the senator was that we were going to aggressively investigate cases. And that’s exactly what we’ve done.

If you look at the [financier Allen] Stanford case, the [mortgage lender Lee] Farkas Colonial Bank case and the thousands of cases around the country and mortgage security fraud that we’ve brought, I think I did exactly what I promised Sen. Kaufman we were going to do.

Kaufman, in the first oversight hearing, asked you, “Why aren’t we seeing more boardroom prosecutions?” And you responded that “We’re bringing the cases, but it will take a long time. But they will be brought.” It’s been four years. There have been no such prosecutions. What did you mean by it would take a long time?

What I meant by it is it takes a long time to investigate these kinds of cases. And I don’t accept your premise that they haven’t been brought. I think it’s a matter of definition.

Since I testified with Sen. Kaufman, we’ve brought a case against Allen Stanford for a $7 billion fraud. Stanford was the president of Stanford Financial. We recently brought two other most senior executives to trial, and we convicted them as well.

We brought Mr. Farkas, who brought down Colonial Bank and TBW [Taylor, Bean & Whitaker Mortgage Corp.], we brought him to trial since that investigation. He was convicted, and he also is serving what is effectively a life sentence, and many of his senior executives are in jail as well.

As recently as last week, we got convictions of the leaders of one of the large markets origination firms on the West Coast. So we have done a lot, and there have been thousands, I think literally thousands, of prosecutions since I testified in front of Sen. Kaufman.

There have been a lot of prosecutions at the origination level.  There have been a number of other cases, like you mentioned Stanford. But that’s a Ponzi scheme. Farkas was not a Wall Street CEO. What Kaufman was asking you was whether or not there are going to be any prosecutions of those people on Wall Street that securitized bad mortgages.
… Let me first say we have prosecuted lots and lots of investment fraudsters. And for the police officer who put his entire retirement savings with an investment fraud — whether it was Mr. [Trevor] Cook or Mr. [Frank] Castaldi or Mr. [Nevin] Shapiro or all of the others [running Ponzi schemes] around the country — these are billion-dollar frauds sometimes. Those police officers and those hardworking people lost their life savings. We were looking hard at people who lost their financial savings on Main Street or on Wall Street, and so we brought those cases.

With respect to Wall Street cases, we looked at those as hard as we looked at any others, and when a case could be brought, we did. But when we cannot prove beyond a reasonable doubt that there was criminal intent, then we have a constitutional duty not to bring those cases.

We spoke to a couple of sources from within the fraud section of the Criminal Division, and through mid-2010 they reported that when it came to Wall Street, there were no investigations going on; there were no subpoenas, no document reviews, no wiretaps.

Well, I don’t know who you spoke with. I mean, I don’t think you spoke to people in my fraud section, because we have looked hard at the very types of matters that you’re talking about.

The Financial [Crisis] Inquiry Commission came forward. I testified before that commission. I gave Mr. [Phil] Angelides and others my commitment. We would look hard. And we looked hard at every one of the referrals that we had. In fact, many of the referrals we had were the very matters that we brought to the attention of the Financial [Crisis] Inquiry Commission.

When the PSI [Permanent Subcommittee on Investigations] looked at matters, we looked hard at those. And indeed when any whistle-blower came forward, at least to my division, I brought in some of the finest and brightest lawyers in the country to look at those matters.

They’re the same kind of lawyers who brought in BP. And we’ve brought the BP case, the largest criminal case. It’s the same lawyers who brought Libor [London Interbank Offered Rate]. Libor will prove to be one of the largest, if not the largest white-collar case in history. It goes after financial institutions, and it goes after the most major players in Wall Street. So I absolutely reject the notion that we didn’t look hard at these kinds of matters.

These sources said that at the weekly indictment approval meetings that there was no case ever mentioned that was even close to indicting Wall Street for financial crimes.
If you look at what we and the U.S. attorney community did, I think you have to take a step back. Over the last couple of years, we have convicted Raj Rajaratnam, one of the largest hedge fund leaders. Now, you’ll say that’s an insider trading case, but it’s clearly going after Wall Street.

But it has nothing to do with the financial crisis, the meltdown, the packaging of bad mortgages that led to the collapse that led to the recession.

First of all, I think that the financial crisis is multifaceted. But even within that, all we can do is look hard at this multifaceted, multipronged problem. And what we’ve had is a multipronged, multifaceted response.

When a criminal case can be brought, whether it’s from an originator, whether it’s from a bank executive who acted with criminal intent, we’ve brought those cases.

But in those cases where we can’t bring a criminal case — and federal criminal cases are hard to bring — I have to prove that you had the specific intent to defraud. I have to prove that the counterparty, the other side of the transaction, relied on your misrepresentation. If we cannot establish that, then we can’t bring a criminal case.

But we don’t let these institutions go. We’ve brought civil cases. We’ve brought regulatory cases. And the entire approach here is to have a multipronged, comprehensive approach to what gave rise to the financial crisis.

In January, during his State of the Union address, the president announced a new Residential Mortgage-Backed Securities Working Group. Why form a new unit then? What was wrong with the original financial fraud unit?

I don’t think there was anything wrong with what was originally going on. What was originally going on was you had United States attorneys around the country working very, very hard, all the way from New York to California.

You had my Criminal Division working on it. You had our SEC [Security Exchange Commission] and other regulators working on it. And indeed, you had the states’ attorneys general working hard, and there was a financial fraud task force that was bringing these people together. And there were many actions brought, some small, some large, some criminal, some civil, some regulatory.

When the Residential Mortgage-Backed Security Working Group was brought about a year ago, I think the sense was after three years of what we had done, we could be even more nuanced, and we could, in a smaller group, even more share information.

And I think you see the results of that. Just within the last couple of months, we have announced some of the largest civil cases ever with respect to this. And I think that is a direct result of this group coming together at this point in time.

Out of the Financial Crisis Inquiry Commission, Phil Angelides spotlighted these Clayton [Holdings] documents that revealed the kind of due diligence that the banks had done on their own mortgage-backed securities. And what he saw there, what he uncovered there, was that Clayton determined that as much as half of or more of the mortgages that made up those securities were below the standards of the bank, yet they were passed along to investors and reps, and warranties were made on these things that were false. He brought that to you as a criminal referral. Why couldn’t that have constituted a criminal case?

I can’t really talk about any specific case, but let me more generally address very directly what you’re saying.

First of all, Phil Angelides and I have had very direct and very good conversations. And indeed, there are lots of U.S. attorneys who have looked at this and related matters.

But in reality, in a criminal case, we have to prove beyond a reasonable doubt — not a preponderance, not 51 percent — beyond any reasonable doubt that a crime was committed. And I have to prove not only that you made a false statement but that you intended to commit a crime, and also that the other side of the transaction relied on what you were saying. And frankly, in many of the securitizations and the kinds of transactions we’re talking about, in reality you had very sophisticated counterparties on both sides.

And so even though one side may have said something was dark blue when really we can say it was sky blue, the other side of that transaction, the other sophisticated party, wasn’t relying at all on the description of the color. They themselves had made their own determination that they either didn’t care about what the representations were, or they themselves were looking at the underlying securities here.

And if I show that sophisticated Bank One is doing a transaction with sophisticated Bank Two, and sophisticated Bank Two knows fully what it’s getting into or doesn’t care at all what the first representations are, then I cannot bring a case.

… The other issue we have here in those kinds of transactions [is] for the most part, you had the most sophisticated bankers and lawyers and accountants as consultants. So for me to bring a criminal case, I have to show that the very sophisticated lawyers on Wall Street who worked on this, the very sophisticated accountants, that either they were in on the crime, or frankly, what is reality is that in these disclosure documents out there, there was enough disclosure that we cannot bring a criminal case.

You know, at the second FINRA [Financial Industry Regulatory Authority] oversight hearing in September of 2010, you come forward. Sen. Kaufman, his staff, others, [Sen. Chuck] Grassley [R-Iowa], they’re frustrated. They’re disappointed with the lack of progress. You had said at the first FINRA oversight hearing nine months earlier that there would be progress. I’ve talked to Sen. Kaufman. I’ve talked to Sen. Grassley. I’ve talked to staffers. I’ve talked to a number of people outside. I’ve talked to Phil Angelides. They told us that they felt that you didn’t make this a top priority.
Well, I’m sorry if they think that, because I made it an incredibly top priority. I think under the watch that we have, if you look at what our division has done and what this department has done, it’s really quite extraordinary. I gave my word that in the area of health care fraud, we would prosecute it zealously, and four years later, we have record levels of Medicare fraud prosecutions.

They’re not criticizing your record, though.

I just want to keep going for a moment. I promised the attorney general and others that we’d get to the bottom of BP, and we have secured the largest criminal case in the history of the republic in BP.

To your credit.

I promised the Congress that in organized crime and the like that we would set new records, and we’ve brought the most dramatic organized crime cases in the history of the republic.

The same DNA that my prosecutors have in those cases they’ve had in the securities area. And when there has been a crime, we have brought it. I have brought in lawyers from the private sector, I’ve brought in lawyers from U.S. attorneys’ offices around the country, and I’ve said to them, “I want you to spend the next year doing nothing but looking at these securitizations.”

I’ve literally had lawyers and U.S. attorneys studying every single one of these, and they come back. And with the same level of zealousness that we have in all those other areas, they’ve looked at it. But ultimately they have said in many of these cases that we cannot bring a criminal case.

Do we drop it? Absolutely not. We share whatever information we can with civil authorities, and civil lawsuits are brought. We share whatever we can with regulators, and regulators bring cases. We’ve been incredibly transparent and open in what we’re doing.

It is simply a fiction to say it hasn’t been a priority, and it’s simply a fiction to say that where crimes were committed, we didn’t pursue the cases. And that’s why where crimes were committed, you have more people in jail today for securities fraud, bank fraud and the like than ever before.

But no Wall Street executives?

No Wall Street executives, if that’s how you want to define it. But Raj Rajaratnam, he’s in jail.

Insider trading case.

Well, he’s a Wall Street executive. And so the reality? Well, I know that that’s not what you’re here to talk about. But the reality is, if a Wall Street executive was involved in a transaction, and on the other side of that transaction was another Wall Street executive, and they both had sophisticated lawyers and they both had sophisticated disclosure documents, as much as the conduct is reprehensible — and let me be clear here. I am personally offended by much of what I have seen. I think there was a level of greed, a level of excessive risk taking in this situation that I find abominable and I find very upsetting. But that is not what makes a criminal case.

What makes a criminal case is that I can prove beyond a reasonable doubt every element of a crime. And if you can show that you disclosed in some document that your lawyers created that the risks that were created that you felt were disclosed in some form, then I cannot prevail in a criminal case. And I have a constitutional obligation not to bring the case.

So history is going to record that the sale, the peddling of bad mortgages was that we were unable to prove that this was intentional beyond a reasonable doubt, and that the people on the other side of the transaction weren’t relying on the reps and warranties made by the bank.
You know what I think it’s going to show, unfortunately? It’s going to show that people in Wall Street and throughout thought that there was no going down in the market. Everybody was going to get rich. And so they bundled these mortgages, and they made representations with their sophisticated lawyers, and another sophisticated entity, another financial institution, purchased those securitizations. And they knew what they were purchasing, or they knew enough about what they were purchasing.

So this is Wall Street’s defense; that this was greedy perhaps, it was wrongheaded, it was mass delusion, but it wasn’t criminal?
Well, I don’t know if it’s its defense. I do think that a lot of the financial crisis is greedy, abhorrent, should not in any way be complimented. It should be condemned. We should pursue it, and we have through incredibly large — the largest civil cases ever. Where criminal cases can be brought, we are bringing them. But there will be a type of conduct that we absolutely can’t bring.

And just to be clear yet again, it’s not like we’re trying to give a pass to Wall Street. Recently we put a managing director of Morgan Stanley in jail. We’ve brought other executives to jail. Where the cases are brought, we have brought them. And where the case can’t be brought, we have investigated them hard.

I brought the most aggressive prosecutors, and my colleagues like Preet Bharara, [U.S. attorney for Southern District] in New York, have put the most aggressive prosecutors on these cases. But if we can’t bring a criminal case, we won’t.

Let me give you a hypothetical case. A group of people are brought in to analyze loans, a due diligence contractor. They examine a group of mortgages, and they’ve been sold by a Wall Street bank. The bank has them [take] a look at them. They find that more than half are below the stated guidelines of the bank. From emails within the bank and from whistle-blower testimony, it’s clear that these mortgages are faulty and that the banks knew it and that they went ahead and sold these to investors. Is that not intentional?

It depends what the facts are. It sure sounds, at the first instance, like it could be intentional.

So that’s fraud?

But wait. We have to look further. It could be fraud, but there’s also civil fraud. We have to determine who knew what exactly, who said what exactly. What did the documents actually say? The people who bought that, the institution that bought the very securitizations or the very loans that you said, what did they understand they were buying? What did they really rely on? Were those representations there?

In the very real world, we have brought in those purchasers in some of these transactions, and we’ve said, “It said A, but it wasn’t A.” And they said: “We didn’t care what it said. We had our own people look at it, and we made our own determination that it wasn’t A, that it was B.” And under federal law, under bank fraud or securities fraud, a false statement isn’t enough.

But there’s dozens of [other] investors that will come forward [and] say that, “It said A, and we got B.” And there are dozens of civil suits that are private litigant suits. And in fact the suits that have been brought by the [attorney generals'] office are clones of those very lawsuits.
If you look at exactly what the AGs are doing, that’s why we have our Residential Mortgage-Backed Securities Working Group, because, as I said, the crisis was multifaceted, and the response has to be. So when the attorney general brings a case, let’s say in New York, he can rely on the Martin Act.

The Martin Act does not require specific intent to commit a crime. The Martin Act doesn’t require the same mental thought that the federal fraud statutes require. It doesn’t require the same level of reliance. It’s a totally different statute.

For me, when I’m looking at the case, and when my prosecutors around the country and my colleagues like Preet Bharara and others will look at it, we have to prove beyond a reasonable doubt. In a civil lawsuit, all that has to be proved is that the government has proved its case by a little over 50 percent, 51 percent. That’s all that needs to be done.

But in a criminal case, we have to prove beyond a reasonable doubt. You can’t have a reasonable doubt when I have the counterparties say, “We didn’t rely on the representation, and we’re the ones who purchased it,” or when I have the originator say, “Look, we may have said A, and maybe it wasn’t A, but we also in our disclosure document show very clearly that we say, ‘Our representations may not exactly be right.’”

I don’t like that conduct. I condemn that conduct. We have to go after that conduct, but it isn’t always going to be a criminal case.

You do have plaintiffs who will come forward and say that they relied on the reps and warranties, and they relied on the due diligence claims that were made by the bank.
And in the cases where we have had that, and when we’ve really dug forward and we have interviewed those whistle-blowers, and when we’ve been able to bring a criminal case, we do. That’s why just in the last few weeks, one of the large mortgage loan originators who defrauded financial institutions in what he was providing is going to jail.

That’s why people who led investment funds who lied about what they were doing are going to jail. That’s why just a couple of weeks ago the MoneyGram suit, which is again where frauds were perpetrated, we resolved that case.

We have brought cases against financial institutions, executives and the like, whether it’s in the securitization space that you’re talking about or, more broadly, securities fraud, financial fraud, health care fraud. The same aggressiveness, the same commitment, the same desire to bring people to justice in one area we’ve brought throughout.

But no matter how morally outraged I am and how morally outraged other people are, when we really examine these cases and we do the hard work, and we look at the thousands and thousands of documents, and we interview the individuals, we only can bring the case when we have a criminal case, no matter the level of moral outrage that’s out there.

We’ve spoken to people inside the Residential Mortgage-Backed Securities Working Group who said that when they began their work in January, February, March of 2012 that they found nothing at the Justice Department in the pipeline, no ongoing cases looking at securitization.
So I don’t know with whom you spoke. Here’s what I can tell you. We looked hard at — it’s public — we looked hard at Goldman Sachs. We looked at it for years, and we made a determination. Our colleagues in the West Coast looked hard at issues like WaMu [Washington Mutual]. They looked at it for years, and they looked at others for years.

It’s simply a fiction to say that we haven’t looked at it, and it’s simply a fiction to say they weren’t in the pipeline. But in the same way that I couldn’t promise you two years ago we were going to bring Libor cases, and now Libor will prove to be one of the largest, if not the largest white-collar case in history against all of the major financial institutions, or many of them, and we put great prosecutors on that and moved forward, we used the exact same level of commitment. We probably had more commitment in looking at the securitizations. It’s the same way that we looked hard over the last two years, my division, at BP and have now brought the largest criminal case ever.

We’re not approaching this any differently. It’s just at the end of the day, we have to look at it hard as prosecutors and lawyers, and we can’t simply rely on our hearts which are so upset about what happened. We have to be able to prove a fraud beyond a reasonable doubt.

Let me get your reaction again back to our hypothetical. If a bank negotiates discounts because it finds, through its due diligence, that many of the loans are not up to standards, and they negotiate a discount with the originator and then don’t pass that on to the investor — this is called “double dipping”; it’s in the civil lawsuits — why isn’t that criminal?

Because what happens in that situation, as upsetting as it sounds, if we find out that the very documents that that bank filled out with the originator have one set of conditions, and the very documents that the bank fills out with those who have invested in the fund say something else? And if you look hard at those documents, what happens if it says in those two documents: “When we’re going to settle on defaulting loans, we may not put it in the fund. We may take a discount. And we may, under certain circumstances, be able to keep the money for ourselves”?

Is it double dipping? It sure may be. But if in the documents that were created, in the two sets of documents with lawyers and accountants, it provides for that scenario, as offensive as it is to me, as incredible as it is to me that people would have agreed to that, I cannot bring a criminal case, because the financial institution can come in and say: “Here is document agreements A. Here are document agreements B. Phenomenal lawyers were involved in A. Phenomenal lawyers were in B,” right there, it’s disclosed.

That’s as good an example as any of the challenges that we, as criminal prosecutors, have in bringing certain kinds of cases. And that’s exactly why we have to review thousands of documents, read the materials and interview lots of people.

A number of people we’ve spoken to have said that you’re simply overmatched. The government is overmatched. And it’s a relatively new phenomenon, and it has to do with the enormous increase in financial innovation and sophistication of banks and financial institutions; that 30 years ago, the Justice Department could go toe to toe with banks in whatever cases might come up. But today, with finding the needle in the haystack, finding the emails that are going to be the smoking gun, [it] is simply beyond your capability.

We have recruited the smartest and best lawyers. The SEC has as well. We don’t have infinite funds, and it would be unfair and fictitious to say we do.

And you don’t have as deep pockets as the banks, right?

But what we do have is we have incredible professionals.

I’m not putting down the staff that you have.

I know you’re not.

… Something seems wrong here to a lot of people who would like to see some closure on what happened in 2008 with the meltdown. I’m groping for an answer here, and one of those that’s been offered is that we simply haven’t adjusted our ability to go after the banks.

I don’t think it’s right to say that we are being overmatched, but I do think it’s fair to say that we have to work within limited resources, and I think it’s fair to say that these kinds of cases take huge resources and a great amount of sophistication.

And the way we do it is that this Department of Justice and I think many of the regulators are more efficient and are working at a higher level than ever before. And we do that by recruiting the finest lawyers we can, both prosecutors from within the department or through district attorneys’ offices and, frankly, private lawyers who come from some of the great law firms in the country who want to serve.

We do it by collaboration with our regulators and with state AGs. I am proud. I think that the relationship between my division and the U.S. attorneys’ offices, my division and regulators, my division and attorneys general has never been stronger and greater.

And it in fact does, as you say, require partnerships. It requires lots of communication. And it requires the kind of openness that I’d like to think I’ve had with Congress, with regulators and the like.

Another criticism that has been thrown at you is that you’ve not done enough to go looking for the whistle-blowers that are out there. We have been able to contact a number of people who were inside the banks, doing due diligence work as contractors, who all told us that they were never contacted by the Justice Department.
I can’t talk in general about nondescript, anonymous whistle-blowers. But here’s what I can tell you. Whenever I personally have been in any public setting, I’ve invited whistle-blowers to come forward.

But why don’t you go out and look for them?

We do go out and look for them. I don’t even know what more I could do. I speak publicly. Preet Bharara, [U.S. Attorney for the Central District of California] Andre Birotte on the West Coast, the U.S. attorneys speak about it. We have a forum where we talk about mortgage fraud and investment fraud, and we go around the country, and we have fora.

We’re available to the press. I’m available to Congress. We passed Dodd-Frank [Wall Street Reform and Consumer Protection Act], which gives whistle-blowers a financial incentive to come forward. I talk to our regulators more than ever. And when journalists come forward and they talk about whistle-blowers or TV shows come on that talk about whistle-blowers who make your very claims, we have FBI agents and lawyers and regulators come speak to those people right away.

… It shouldn’t be so easy for journalists to go out and find whistle-blowers that at this point, four years after the meltdown, haven’t been contacted by Justice.

I don’t accept for one moment that you all are finding whistle-blowers that we’re not. What I do believe is then when we speak to the whistle-blowers, we have to make a determination whether what they say is really a criminal case.

So in your scenario, before where you say, “How is it possible that the bank is able to keep some of the proceeds and not pass it over?,” the whistle-blower may say, “I saw that the bank kept those proceeds.” I’m offended by it, but unfortunately, when we look at the documents, when we look at the origination materials and we look at the contracts, it says in those contracts that this reprehensible conduct is permitted. …

We can’t lose track of the fact that in our federal prisons and in state jails around the country are thousands of people who engaged in securities fraud. Now, it may not be precisely what you want to talk about today, the highest level securitizations, but those people are in jail.

It was the money generated by selling those securitizations on Wall Street that fueled all the origination. That was the core. That was the money engine on Wall Street.
And I totally agreed that that was right.

Without that, we wouldn’t have had all the appraisal fraud and all the straw buyers that you have in all of these prosecutions at the low level.

And as a country, we, as I’ve said before, have to address how that happened and why it happened. And we need policymakers and legislators to pass laws to ensure, and regulators to become stronger, which I think they have, to ensure that this doesn’t happen again.

And when the loan originator committed a crime, that loan originator is in jail. When the people perpetrated frauds in Nevada against all of these housing sectors and authorities, all of those people are in jail, including lawyers.

As they should, right?
And in Wall Street, when people like Marc Dreier, who is the head of a major Wall Street firm and is an Ivy League-educated, wealthy person, perpetrated a fraud and we could establish it, he’s in jail.

But that’s not the fraud that we’re talking about here.

… I have to prove that you had the specific intent to commit a crime and that the other side relied on it. And if you can establish that you relied on the finest lawyers in the country to draft the materials, that you were open about your greed, that you were open about the fact that your representations may not be precise, do I think we should run you out of town? Maybe we should run you out of town. Do I think we should sue you for every penny you’re worth? I think we should sue you for every penny you’re worth. But our criminal justice system is created so that in that kind of a situation, we cannot prevail. And juries in this country don’t care about moral outrage. …

You gave a speech before the New York Bar Association. You talked about your use of nonprosecution and deferred prosecution agreements. And in that speech, you made a reference to “losing sleep at night over worrying about what a lawsuit might result in at a large financial institution.” Is that really the job of a prosecutor, to worry about anything other than simply pursuing justice?

I think I am pursuing justice. And I think the whole entire responsibility of the department is to pursue justice. But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case there’s some huge economic effect, it affects the economy so that employees who had nothing to do with the wrongdoing of the company –

Or shareholders.

Well, first let’s talk about the employees. Employees may lose their jobs. Shareholders may or may not lose, and shareholders invested. But the employees perhaps did something different.

If it creates a ripple effect so that suddenly counterparties and other financial institutions or other companies that had nothing to do with this are affected badly, it’s a factor we need to know and understand.

We have, as a government and as an administration, dug out of one of the great financial crises in the world. And at the Department of Justice, we’re being aggressive, but we should in fact take into consideration what the experts tell us.

That doesn’t mean we won’t go forward, but it has to be a factor. And if you look at deferred prosecution agreements and nonprosecution agreements, they are a tool that we use in appropriate cases. And we have to continue to use those.

Why not go after individuals rather than institutions and create real deterrents by prosecuting individuals?
That’s exactly what we did. Garth Peterson is a managing director of Morgan Stanley. He’s in jail. And we dealt with Morgan Stanley differently. I’ve announced indictments of more executives in the whole array of industries than ever before.

Just two weeks ago in the BP case, which is ongoing, the largest criminal case, we announced prosecutions against individuals. We have every day announced cases against individuals, and we’re going to continue to do so. And that’s why we have had just in the last year executives go to jail for 110 years, 105 years, 60 years, 50 years, 40 years. These were senior executives who were living very affluent lives. And they effectively are in jail now for the rest of their lives.

The public thinks Wall Street’s getting a pass.

I understand that the world is upset. And I’m upset. I get it. I work with career government people. They’re my friends, and they’re my colleagues. They have lost their 401(k)s. My own family has lost their 401(k)s. I get it and understand it.

We are holding people to account, but in holding them to account, it cannot always be a criminal case. And in the same way that our 94 U.S. attorneys around the country, or state AGs around the country, or district attorneys around the country are looking at these matters, they cannot always bring a criminal case. When they can, they do. And when they can’t, there are other responses. And those other responses have to be regulatory, civil and legislative reform.