Waters: Government needs to get tougher with Wall Street

By Peter Schroeder - 02/07/13 12:01 PM ET

Rep. Maxine Waters (D-Calif.) likes what the Justice Department has done to crackdown on Wall Street — but wants to see much more.

The ranking member of the House Financial Services Committee sent a letter to Attorney General Eric Holder on Wednesday saying she is still "generally concerned" about whether federal prosecutors have done enough to punish bad behavior by the financial sector, especially when it comes to filing criminal charges.

"In the absence of any indictments in cases involving 'egregious' misconduct the negative incentives that encourage and reward rule breaking will remain unchecked," she wrote.

Waters invited Holder or members of his financial crime team to attend a roundtable with committee members to discuss the Justice Department's handling of financial malfeasance. She said lawmakers are "anxious" to learn more about why the government will opt for monetary settlements instead of criminal charges, and also whether Justice takes into account the role an institution plays in the financial sector when considering enforcement.

Some lawmakers have accused the Justice Department of avoiding harsh punishments for major Wall Street institutions out of concern over what that turmoil could do the broader financial market. In a letter sent to Holder in January, Sens. Sherrod Brown (D-Ohio) and Charles Grassley (R-Iowa) wondered if such a policy is effectively making some banks "too big to jail."

Waters said she too would want to see some criminal prosecutions brought down on Wall Street misbehavior, but said Justice officials have told her that there is sometimes a lack of evidence to prove that traders acted with criminal intent.

Federal regulators have brought forward a number of cases and achieved numerous settlements from Wall Street institutions for actions leading up to the financial crisis. On Wednesday, the Justice Department and Commodity Futures Trading Commission (CFTC) struck a settlement with the Royal Bank of Scotland over its long-running efforts to manipulate a key interest rate. Between British and U.S. regulators, the bank agreed to pay $612 million in penalties.

The Justice Department also recently brought a civil suit against the credit rater Standard & Poor's, accusing it of fraudulent behavior in assigning top-shelf credit ratings to a range of mortgage-backed financial products that ultimately proved worthless. The credit rater has vowed to fight those charges.