Loretta Lynch Unlikely to End “Too Big to Jail”

January 30th, 2015

The Senate Judiciary Committee held hearings this week to vet Loretta Lynch, President Obama’s nominee for Attorney General. While the Republican-led committee peppered questions at Lynch over the course of two days, the Senators generally avoided Wall Street as a topic of discussion.

Senator Mike Lee (R-UT) most directly pressed the issue by asking Lynch about Operation Choke Point, a controversial program through which the Department of Justice (DOJ) has put pressure on banks that do business with questionable companies. In a fashion typical of the hearings, Lynch provided a well mannered, avoid-the-fireworks type of response in saying she looks forward to working with the Senator on that issue.

Lynch’s background provides some insight into her views of Wall Street. From 2003 to 2005 she served as a board member of the Federal Reserve Bank of New York. While she has spent most of her career as US attorney for the Eastern District of New York, she took brief stints in corporate law firms, namely Cahill Gordon & Reindel in the mid-1980s, and Hogan & Hartson (later Hogan & Lovells) in the late 1990s.

Lynch’s resume sparked one liberal commentator to say, “To ask her to take on powerful interests in finance would be like asking someone to rat out their friends.”

Nonetheless, Lynch has some history in investigating banks as a prosecutor. In December of 2012, Lynch reached a $1.9 billion deferred prosecution agreement with HSBC, in which the bank admitted to massive criminal money laundering. In a prior Judiciary Committee hearing, Attorney General Eric Holder was asked why HSBC did not face criminal charges. In response, Holder made his now notorious remarks suggesting that some firms are “too big to jail.”

Ultimately, most experts do not believe Lynch’s appointment should frighten Wall Street. “We remain committed to our view that the Department of Justice is unlikely to continue aggressively pursuing crisis-era mortgage claims from the nation’s banks, and Lynch’s nomination is supportive of that view,” Isaac Boltansky, an analyst at Compass Point Research & Trading, stated in a note to clients.​

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