Eric Holder, Wall Street Double Agent, Comes in From the Cold

Barack Obama's former top cop cashes in after six years of letting banks run wild

Eric Holder is back at Covington & Burling after serving as U.S. attorney general for six years. Credit: Saul Loeb/AFP/Getty

Eric Holder has gone back to work for his old firm, the white-collar defense heavyweight Covington & Burling. The former attorney general decided against going for a judgeship, saying he's not ready for the ivory tower yet. "I want to be a player," he told the National Law Journal, one would have to say ominously.

Holder will reassume his lucrative partnership (he made $2.5 million the last year he worked there) and take his seat in an office that reportedly – this is no joke – was kept empty for him in his absence.

The office thing might have been improper, but at this point, who cares? More at issue is the extraordinary run Holder just completed as one of history's great double agents. For six years, while brilliantly disguised as the attorney general of the United States, he was actually working deep undercover, DiCaprio in The Departed-style, as the best defense lawyer Wall Street ever had.

Holder denied there was anything weird about returning to one of Wall Street's favorite defense firms after six years of letting one banker after another skate on monstrous cases of fraud, tax evasion, market manipulation, money laundering, bribery and other offenses.

"Just because I'm at Covington doesn't mean I will abandon the public interest work," he told CNN. He added to the National Law Journal that a big part of the reason he was going back to private practice was because he wanted to give back to the community.

"The firm's emphasis on pro bono work and being engaged in the civic life of this country is consistent with my worldview that lawyers need to be socially active," he said.

Right. He's going back to Covington & Burling because of the firm's emphasis on pro bono work.

Here's a man who just spent six years handing out soft-touch settlements to practically every Too Big to Fail bank in the world. Now he returns to a firm that represents many of those same companies: Morgan Stanley, Wells Fargo, Chase, Bank of America and Citigroup, to name a few.

Collectively, the decisions he made while in office saved those firms a sum that is impossible to calculate with exactitude. But even going by the massive rises in share price observed after he handed out these deals, his service was certainly worth many billions of dollars to Wall Street.

Now he will presumably collect assloads of money from those very same bankers. It's one of the biggest quid pro quo deals in the history of government service. Congressman Billy Tauzin once took a $2 million-a-year job lobbying for the pharmaceutical industry just a few weeks after helping to pass the revolting Prescription Drug Benefit Bill, but what Holder just did makes Tauzin look like a guy who once took a couple of Redskins tickets.

In this light, telling reporters that you're going back to Covington & Burling to be "engaged in the civic life of this country" seems like a joke for us all to suck on, like announcing that he's going back to get a doctorate at the University of Blow Me.

Holder doesn't look it, but he was a revolutionary. He institutionalized a radical dualistic approach to criminal justice, essentially creating a system of indulgences wherein the world's richest companies paid cash for their sins and escaped the sterner punishments the law dictated.

Here are five pillars of the Holder revolution:

One is that he failed to win a single conviction in court for any crimes related to the financial crisis. The only trial of any consequence brought by his Justice Department for crimes related to the crisis involved a pair of Bear Stearns nimrods named Ralph Cioffi and Matthew Tannin, who confided in each other via email that the subprime markets were "toast" but told their clients something very different to keep them invested.

After a jury acquitted both in early 2009, the Holder Justice Department turtled. Sources inside the DOJ told me over the years that both Holder and his deputy, fellow Covington & Burling alum Lanny Breuer, were obsessed with winning and refused to chance any case where they felt a jury might go sideways on them. Thus the Cioffi-Tannin case was the last financial crisis case they dared to bring into to a criminal courtroom – virtually every other case ended in settlements.

Two: Holder famously invented a concept called "collateral consequences," under which the state could pursue non-criminal alternatives for companies if they believed prosecuting them might result in too much "collateral" damage. Britain's HSBC bank, which admitted to massive money laundering violations, and the Swiss bank UBS, which was caught manipulating the Libor interest rate benchmark, were examples of firms that escaped vigorous prosecution because Holder and his lackeys were, ostensibly anyway, concerned about market-altering consequences.

Significantly, both banks were later caught up in even more serious scandals, leading to criticism that stiffer punishments the first time around might have prevented future damage. Holder's successor Loretta Lynch was even forced to rip up Holder's UBS deal for being insufficiently punitive. It's worth noting that Holder, before he became attorney general, represented UBS at Covington & Burling.

Holder's lenient policies were deployed at a time when fellow officials like Tim Geithner and Ben Bernanke were using bailout monies to merge troubled firms together and create even larger mega-companies. Chase and Wells Fargo, which swallowed up Washington Mutual and Wachovia in state-aided takeovers, were prototypes of the modern mega-bank. So when Holder wedded "collateral consequences" to these new Too Big to Fail mega-firms, he created Too Big to Jail. This is a huge part of his legacy, the creation of an unjailable class.

Three: Holder also pioneered the extrajudicial settlement, striking huge deals with companies in which judges did not sign off on the agreements. The arrangement prevented pesky judges like the irksome Jed Rakoff (who voided a pair of settlements he felt were inadequate) from protesting lenient justice.

This essentially institutionalized the backroom deal. Everything was done in secret, and there was no longer any opportunity for judges or anyone else to check the power of the executive branch to hand out financial indulgences.

The watchdog group Better Markets described the $13 billion Chase settlement, one of the biggest extrajudicial deals, as "an unprecedented settlement amount [that] cannot…immunize the DOJ from having to obtain independent judicial review of its otherwise unilateral, secret actions."

Four: There is a huge misconception, pushed equally by odd bedfellows in the financial community and Obama supporters, that Eric Holder didn't send anyone from Wall Street to jail because "no one broke any laws."

This preposterous meme grew out of something Barack Obama said on 60 Minutes. Here are the president's exact words:

"Some of the most damaging behavior on Wall Street — in some cases some of the least ethical behavior on Wall Street — wasn't illegal."

Obama, a brilliant lawyer and wordsmith, was not saying that all of the behavior leading to the crash was legal. He merely said that some of the worst behavior wasn't illegal. Which is true. Meaningless, but true.

Of course, some of the worst behavior was very illegal. This is confirmed in the fact that Holder extracted billions of dollars in settlement monies and even, in a few cases, obtained guilty pleas for crimes like fraud, manipulation, bribery, money laundering and tax evasion.

Anyone who even tries to claim that none of the banks actually did anything illegal should be directed to the HSBC settlement of December 2012. In this deferred prosecution agreement, Europe's largest bank paid $1.92 billion to settle their responsibility for violations of the Bank Secrecy Act and other laws.

This is from a description of HSBC's crimes by Holder's Justice Department:

"As a result of HSBC Bank USA's AML failures, at least $881 million in drug trafficking proceeds – including proceeds of drug trafficking by the Sinaloa Cartel in Mexico…were laundered through HSBC Bank USA."

You might remember the Sinaloa cartel for their ISIS-style, unforgettably upsetting torture videos. HSBC washed their cash. They even created special teller windows to make their deposits easier. This is admitted, not alleged.

But Holder went out of his way to let them keep their U.S. charter. He gave their executives a grand total of zero days in jail, zero dollars in individual fines.

To reiterate: HSBC laundered money for guys who chop peoples' heads off with chainsaws. So we can dispense with the "but no one broke any laws" thing.

When asked about this in testimony before the Senate, Holder told elected officials he was concerned harsher penalties against firms like HSBC would "have a negative impact on the national economy," and that this "has an inhibiting influence…on our ability to bring resolutions that I think would be more appropriate."

Compare this to what he just said after returning to Covington & Burling:

"I think that what we did in the department was, I always like to say, appropriately aggressive. There may be clients that, for whatever reason, will not decide to work with me..."

Oddly enough, Holder used that same phrase – "appropriately aggressive" – in his Senate testimony. In other words, the attorney general said he was "inhibited" from giving "appropriate" punishments just a few moments before claiming his punishments were appropriate. This is classic Clintonian politics, saying two things at the same time, neither of them true.

Five: Holder contributed countless subtle inventions to soften punishments. The most revolting in my view was allowing banks like Chase the courtesy of calling their settlements "remedial payments" instead of fines for wrongdoing.

This seemingly insignificant semantic tweak allowed the bank to call $7 billion of their settlement a business expense, which meant they could claim it as a tax deduction, which in turn meant that taxpayers like you and me paid a whopping $2.45 billion of Chase's penalty.

Some of the write-ups of these decisions emanating from the financial and legal press were hilarious., noting that the settlement language meant that 35 percent of the bank's regulatory burden would be shifted "onto the backs of taxpayers," pointed out, as if surprised, that the tax treatment "sparked debate" and that "some are even angry about it." Shocking!

Of course, none of us mortals can deduct so much as a speeding ticket, since we wouldn't want to use the tax code to encourage speeding. So why was it OK for the nation's top cop to make fraud or money laundering a tax-subsidized activity?

There were other tricks. Banks that committed multiple violations of the same offense were often allowed to settle or plead to just one count. And in many cases the fines were staggeringly low compared to the volume of crime – BNP-Paribas, for instance, paid $8.9 billion after laundering $30 billion, meaning they paid about 27 cents per dollar of violations.

Holder is a cynic of a type that's increasingly common in Washington. To follow his Justice Department was like watching an endless reel of The Good Wife – smart lawyers half-cleverly constructing one unseemly moral compromise after another, always justifying it to themselves in the end somehow in the name of keeping the ball rolling.

Holder doubtless seriously believed at first that in a time of financial crisis, he was doing the right thing in constructing new forms of justice for banks, where nobody but the shareholders actually had to pay for crime. You've heard of victimless crimes; Holder created the victimless punishment.

But in the end, it was pretty convenient, wasn't it, that "the right thing" also happened to be the strategy that preserved Democratic Party relationships with big-dollar donors, kept the client base at Holder's old firm nice and fat, made the influential rich immeasurably richer and allowed Eric Holder himself to crash-land into a giant pile of money upon resignation.

What a coincidence! In any civilized country, it'd be a scandal. In America, though, he's just another guy selling whatever he can to get by. It was just too bad that what Holder had to sell was the criminal justice system.

Below, watch Matt Taibbi discuss Holder on Wednesday's episode of Democracy Now!