A Star Panel Debates Financial Crisis Prosecutions

Did felons get a free pass in the financial crisis?

That was the provocative title of a panel discussion at New York University School of Law on Wednesday, featuring a trio of bold-faced names in the white-collar world: Lanny Breuer, the head of the Justice Department’s criminal division; Eliot Spitzer, the former governor and attorney general of New York; and Mary Jo White, the former United States attorney in Manhattan and now a white-collar defense lawyer at Debevoise & Plimpton.

Moderated by a New York University law professor, Neil M. Barofsky, a former federal prosecutor and inspector general of the Treasury Department’s bank bailout program, the lunchtime session delved into whether authorities had done enough in the aftermath of the collapse.

Evoking memories of the zealous prosecutor that he once was, Mr. Spitzer took a hard-line stance.

“There was significant deception and fraud that should be prosecuted,” he said.

Mr. Spitzer argued, as he has before, that documents from Clayton Holdings, a due-diligence company retained by banks to analyze the credit quality of mortgages, would lead to criminal cases.

“Corporations are not held accountable,” Mr. Spitzer said. “Wall Street persuaded us that they could regulate themselves. Self-regulation is complete hokum – it doesn’t work, and will never work.”

Mr. Breuer, the assistant attorney general, defended the Justice Department’s record. He explained that, over the last three years, the government had indicted more than 2,000 people around the country for mortgage fraud.

“I just don’t accept the fact that we haven’t done anything,” said Mr. Breuer, who pointed out that a team of government lawyers was currently in Houston, prosecuting the financier R. Allen Stanford on fraud charges.

As for the big banks, Mr. Breuer said that bringing criminal cases was challenging, as the government must prove every element of a crime beyond a reasonable doubt.

“Viscerally, I understand people want to see Wall Street executives being ushered out in handcuffs,” Mr. Breuer said. “While I understand the desire, that’s not enough.”

Ms. White, the former prosecutor-cum-defense lawyer, echoed the note of caution.

“We must distinguish what is criminal from what is reckless behavior or bad business decisions and not bow to the frenzy,” Ms. White said. “And I worry the frenzy overrides reason and judgment sometimes.”

Mr. Barofsky asked Mr. Breuer about the new financial fraud task force announced in President Obama’s State of the Union address last month. He questioned whether the new initiative, because it followed several prior task forces, amounted to little more than a marketing ploy by the White House.

Mr. Breuer defended the new group, saying that this time around the various law enforcement agencies had redoubled their efforts at cooperation and coordination.

“I spent two days with [New York attorney general] Eric Schneiderman, and candidly I probably wouldn’t have had it not been for this task force,” he said. “I spent all day at the S.E.C. and talked about these issues.”

Ms. White and Mr. Spitzer were skeptical.

“The concern is that they announce the task force and there will be cases,” she said. “It gets back to my frenzy concern. You don’t want that in the system – that kind of pressure. You don’t want the search for scalps to be the metric for success. Politics doesn’t belong in this space at all, but it still is in the space.”

“Creating a new task force doesn’t do anything,” Mr. Spitzer said.

Mr. Breuer expressed frustration at the views of his fellow panelists.

“On the one hand we haven’t done enough; on the other, task forces are too aggressive,” he said. “But you can get it right.”

Mr. Barofsky followed up by asking Mr. Breuer why Preet S. Bharara, the United States attorney in Manhattan, whose office has been out front in bringing securities-fraud prosecutions, wasn’t on the task forces.

“Preet is a leader in this space and will continue to be,” Mr. Breuer said. “I know he’s heartbroken that there are a couple of meetings in Washington that he’d have to miss that might get in the way of his posing for the cover of Time magazine.”

Without skipping a beat, Mr. Barofsky seized upon Mr. Breuer’s playful jibe. He held up a copy of Time to the audience and read the magazine’s cover line in a mock dramatic tone: “He is the man who busted Wall Street.”