Financial regulators faced relentless questioning Thursday from senators frustrated the nation's largest financial institutions haven't faced tougher penalties and more prosecutions for corporate malfeasance.
"If you're caught with an ounce of cocaine, the chances are good you're going to jail," said Sen. Elizabeth WarrenElizabeth WarrenDems question potential Kushner real estate deal with Chinese firm Inspector general reviewing HHS decision to halt ObamaCare ads Warren: 'Today is a great day... but I'm not doing a touchdown dance' MORE (D-Mass.) at the Banking Committee hearing. "Evidently, if you launder nearly $1 billion for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night."
Much of the ire was directed toward the government's December decision to levy a $1.9 billion fine against HSBC for years of money laundering for Mexican drug cartels and violating sanctions by doing business in nations including Iran, Libya, Sudan, Burma and Cuba.
Despite repeated warnings, the deal reached by the Justice Department did not include any criminal charges against the institution or individuals.
Further drawing lawmakers' ire were comments made by Attorney General Eric HolderEric H. HolderOvernight Tech: Senate moving to kill FCC's internet privacy rules | Bill Gates pushes for foreign aid | Verizon, AT&T pull Google ads | Q&A with IBM's VP for cyber threat intel Uber leadership sticking by CEO Top Dems prep for future while out of the spotlight MORE on Wednesday.
Holder told the Senate Judiciary Committee he was concerned that the size of some banks had made prosecuting them difficult because their downfall could damage the financial system and economy.
Sen. Jeff MerkleyJeff MerkleyThe Hill’s Whip List: Where Dems stand on Trump’s Supreme Court nominee Dem senator accuses Trump of 'dangerous tilt towards authoritarianism' Overnight Regulation: Dems punch back in fight over CEO pay rule MORE (D-Ore.) contended that this claim suggested that "we have a prosecution-free zone for large banks in America."
"Does this create a fundamental concern about a fair system of justice across America?" he asked.
"Yes," responded Federal Reserve Governor Jerome Powell.
Regulators tried to defend their actions, pointing out that the HSBC fine was the largest they had ever levied against a financial institution, and suggested the Justice Department was the proper place to direct complaints.
"We of course were working on this investigation with the Justice Department, but at the end of the day it is the Justice Department's sole prerogative," said David Cohen, the Treasury's under secretary for terrorism and financial intelligence.
"The Justice Department makes that decision. We play a role," agreed Powell. "When they make these decisions, they make them themselves."
Regulators noted that they would not have the power to take dramatic action like revoking a bank's charter to do business in the United States without a criminal conviction. And pursuing criminal charges is the Justice Department's call.
But senators remained critical of the response from financial regulators.
Sen. Mark WarnerMark WarnerSunday shows preview: Aftermath of failed healthcare bill Devin Nunes has jeopardized the oversight role of Congress Senators push Trump on defense deals with India MORE (D-Va.), who chaired the hearing, reminded them that beyond fines, regulators still had other tools they could use, like issuing injunctions or barring individuals from working in the field — tools they were not utilizing.
"There are things short of simply punting this to the Justice Department," he said, accusing regulators of playing "pass the potato" with responsibility.
A growing number of lawmakers in both parties have become increasingly concerned about whether large financial institutions are becoming "too big to jail." The Justice Department has said it consults with experts on the economic impact of bringing charges, and Holder's comments indicated federal prosecutors were worried about dropping the hammer on banks because of negative collateral damage in markets and the economy.
Under questioning, Cohen told members that the Justice Department asked for the Treasury's assessment on the economic impact of bringing charges against HSBC but the Treasury declined to offer an opinion.
"We told the Justice Department that we weren't in any position to offer any meaningful assessment," he said.
Powell said the Fed was not specifically asked about the economic impact. Thomas Curry, the Comptroller of the Currency, said he discussed revoking the bank's charter with the Justice Department, but did not offer an economic assessment.
"Our position was that that's a criminal justice determination that's left to the discretion of the Justice Department," he said.
Sen. Joe ManchinJoe ManchinPence pushes Manchin in home state to support Gorsuch Under pressure, Dems hold back Gorsuch support The Hill’s Whip List: Where Dems stand on Trump’s Supreme Court nominee MORE (D-W.Va.) suggested the matter would not end at the close of the hearing, requesting the DOJ officials be summoned before the committee to explain their rationale for not pursuing criminal charges. Warner said he would take up the matter with the committee's chairman, Sen. Tim JohnsonTim JohnsonCourt ruling could be game changer for Dems in Nevada Bank lobbyists counting down to Shelby’s exit Former GOP senator endorses Clinton after Orlando shooting MORE (D-S.D.), who attended another hearing.
The hearing was almost exclusively attended by Democrats, but members ranging from liberal favorites like Warren to more business-friendly ones like Warner were unanimous in criticizing the regulatory response to banks' bad behavior.
The lone Republican who attended the hearing, Sen. Mark KirkMark KirkObamaCare repeal bill would defund Planned Parenthood Leaked ObamaCare bill would defund Planned Parenthood GOP senator won't vote to defund Planned Parenthood MORE (R-Ill.), joined in the lambasting.
"You would think there would be one hell of a penalty," he said.
At one point, he joked that he and Warren should open a bank that handles just money laundering for drugs and terrorism.
"I think we can make a killing that way, and no danger of prosecution," he said.