The Decline in Criminal Trials Involving Big Banks and Managers Post-2008: A Review of Expert Opinions

Since the financial crisis of 2008, there has been a notable reduction in criminal trials involving major banks and their executives. This phenomenon has sparked debate among legal and financial experts who attribute the decline to various factors, including changes in the approach of the Justice Department, labor consequences from previous prosecutions, and the socioeconomic impact of such actions.

Expert Perspective: The Role of the Justice Department

One popular viewpoint is that the Department of Justice (DOJ) has shifted its focus away from prosecuting corporate malfeasance and its associated executives. According to Pulitzer Prize-winning author Jesse Eisinger, the Enron scandal marked a significant turning point. In his interview with Fresh Air, Eisinger elaborates on how the prosecution of Enron and its accounting firm, Arthur Andersen, led to a backlash against such actions within the DOJ. This backlash resulted in a policy, albeit not explicit, that curtailed the DOJ's ability to indict corporations for wrongdoings. Consequently, the DOJ is now largely limited to settlement options, such as deferred prosecution agreements (DPAs).

Eisinger further argues that the shift towards DPAs as the primary method of addressing corporate misconduct has several adverse effects. Firstly, it diminishes the incentive for the DOJ to prosecute companies, as settlements become more attractive and easier to manage. Over the past decade, the DOJ has entered into over 400 such agreements, compared to a negligible number in the preceding decade. This shift, according to Eisinger, leads to a loss of the DOJ's capacity to effectively prosecute individuals and corporations alike.

Alternative Viewpoints: No Crimes to Prosecute?

Counter to Eisinger's perspective, some experts argue that the absence of significant criminal prosecutions could be due to an absence of crimes to pursue. Michael Lewis, in an interview (which needs to be located and cited properly), may have put forth this argument. This viewpoint suggests that subsequent financial crises did not unearth the same level of criminal wrongdoing that was present in the Enron scandal. Without substantial evidence of illegal activities, there is less grounds to pursue criminal charges.

Impact of Previous Actions on Labor and Public Perception

The labor implications of previous prosecutions also played a role in the DOJ's decision-making. The Enron case not only led to the dissolution of Arthur Andersen but also resulted in the layoff of thousands of employees. This significant collateral damage likely contributed to public and political resistance against similar actions in the future. The fear of such negative consequences likely influenced the DOJ to adopt a more cautious and negotiated approach to corporate prosecutions.

Conclusion: A Complex Landscape

The decline in criminal trials involving big banks and their managers since 2008 is a multifaceted issue. While the DOJ's strategic shift towards settlement agreements and the potential absence of significant criminal activities are contributing factors, the labor and public perception impacts of previous actions cannot be ignored. Understanding this complex landscape is crucial for formulating effective policy responses to financial misconduct.

Keywords: bank prosecutions, corporate malfeasance, prosecutorial approach