By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Originally published at New Economic Perspectives

By issuing its new memorandum the Justice Department is tacitly admitting that its experiment in refusing to prosecute the senior bankers that led the fraud epidemics that caused our economic crisis failed. The result was the death of accountability, of justice, and of deterrence. The result was a wave of recidivism in which elite bankers continued to defraud the public after promising to cease their crimes. The new Justice Department policy, correctly, restores the Department’s publicly stated policy in Spring 2009. Attorney General Holder and then U.S. Attorney Loretta Lynch ignored that policy emphasizing the need to prosecute elite white-collar criminals and refused to prosecute the senior bankers who led the fraud epidemics.

It is now seven years after Lehman’s senior officers’ frauds destroyed it and triggered the financial crisis. The Bush and Obama administrations have not convicted a single senior bank officer for leading the fraud epidemics that triggered the crisis. The Department’s announced restoration of the rule of law for elite white-collar criminals, even if it becomes real, will come too late to prosecute the senior bankers for leading the fraud epidemics. The Justice Department has, effectively, let the statute of limitations run and allowed the most destructive white-collar criminal bankers in history to become wealthy through fraud with absolute impunity. This will go down as the Justice Department’s greatest strategic failure against elite white-collar crime.

The Obama administration and the Department have failed to take the most basic steps essential to prosecute elite bankers. They have not restored the “criminal referral coordinators” at the banking regulatory agencies and they have virtually ignored the whistleblowers who gave them cases against the top bankers on a platinum platter. The Department has not even trained its attorneys and the FBI to understand, detect, investigate, and prosecute the “accounting control frauds” that caused the financial crisis. The restoration of the rule of law that the new policy promises will not happen in more than a token number of cases against senior bankers until these basic steps are taken.

The Justice Department, through Chris Swecker, the FBI official in charge of the response to mortgage fraud, issued two public warnings in September 2004 — eleven years ago. First, there was an “epidemic” of mortgage fraud. Second it would cause a financial “crisis” if it were not stopped. The Department’s public position, for decades, was that the only way to stop serious white-collar crime was by prosecuting the elite officials who led those crimes. For eleven years, however, the Department failed to prosecute the senior bankers who led the fraud epidemic. The Department’s stated “new” position is its historic position that it has refused to implement. Words are cheap. The Department is 4,000 days late and $24.3 trillion short. Economists’ best estimate is that the financial crisis will cause that massive a loss in U.S. GDP — plus roughly 15 million jobs lost or not created.

Americans need to come together to demand that the Department act, not just talk, to restore the rule of law and prosecute the bankers that led the fraud epidemics that drove the financial crisis. There is very little time left to prosecute, so the effort must be vigorous and urgent and a top priority.

Here is an example, in the cartel context, of the Department’s long-standing position that deterrence of elite white-collar crimes requires the prosecution and incarceration of the businessmen that lead the crimes. It contains the classic quotation that the Department has long used to explain its position. Note that the public statement of this position was early in the Obama administration (April 3, 2009), but plainly was already long-standing. The Department’s official made these passages her first two paragraphs in order to emphasize the points – and the fact that deterrence through the criminal prosecution of elite white-collar criminals works.

It is well known that the Antitrust Division has long ranked anti-cartel enforcement as its top priority. It is also well known that the Division has long advocated that the most effective deterrent for hard core cartel activity, such as price fixing, bid rigging, and allocation agreements, is stiff prison sentences. It is obvious why prison sentences are important in anti-cartel enforcement. Companies only commit cartel offenses through individual employees, and prison is a penalty that cannot be reimbursed by the corporate employer. As a corporate executive once told a former Assistant Attorney General of ours: “[A]s long as you are only talking about money, the company can at the end of the day take care of me . . . but once you begin talking about taking away my liberty, there is nothing that the company can do for me.”(1) Executives often offer to pay higher fines to get a break on their jail time, but they never offer to spend more time in prison in order to get a discount on their fine. We know that prison sentences are a deterrent to executives who would otherwise extend their cartel activity to the United States. In many cases, the Division has discovered cartelists who were colluding on products sold in other parts of the world and who sold product in the United States, but who did not extend their cartel activity to U.S. sales. In some of these cases, although the U.S. market was the cartelists’ largest market and potentially the most profitable, the collusion stopped at the border because of the risk of going to prison in the United States.

As prosecutors, (real) financial regulators, and criminologists, we have known for decades that the only effective means to deter elite white-collar crimes is to imprison the elite officers that grew wealthy by leading those crimes (which include the largest “hard core cartels” in history – by three orders of magnitude). In the words of a Deutsche Bank senior officer, the bank’s participation in the Libor cartel produced a “mountain of money” for the bank (and the officers). Holder’s bank fines were useless – and the Department’s real prosecutors told him why they were useless from the beginning. No one, of course, thinks Holder went rogue in refusing to prosecute fraudulent bank officers. President Obama would have requested his resignation six years ago if he were upset at Holder’s grant of de facto immunity to our most destructive elite white-collar criminals.

Our saying during the savings and loan debacle was that in our response we must not be the ones “chasing mice while lions roam the campsite.” Holder, and his predecessors under President Bush, chased mice – and fed them to the lions. They overwhelmingly prosecuted working class homeowners who had supposedly deceived the most fraudulent bankers in world history – acting like a collection agency for the worst bank frauds.

As a U.S. attorney, Loretta. Lynch failed to prosecute any of the officers of HSBC that laundered a billion dollars for Mexico’s Sinaloa drug cartel and violated international and U.S. anti-terrorism sanctions. The HSBC officers committed tens of thousands of felonies and were caught red-handed, but now Attorney General Lynch refused to prosecute any of them – even the low-level fraud “mice.” Dishonest corporate leaders are delighted to trade off larger fines – which are paid for by the shareholders – to prevent the prosecution of even low-level officers who might “flip” and blow the whistle on the senior banksters that led the fraud schemes. To its shame, the Department’s senior leadership, including Holder and Lynch, have pretended for at least 11 years that the useless bank fines were a brilliant success. Those bank fines are paid by the shareholders. The Department’s cynical sweetheart deals with the elite criminals allowed them to keep their jobs and massive bonuses that they received because of the frauds they led. The Department compounded its shame by bragging that it was working with Obama’s (non) regulators to create guilty plea “lite” in which banks that admitted they committed tens of thousands of felonies involving hundreds of trillions of dollars of fraud were relieved of the normal restrictions that a fraud “mouse” is invariably subjected to for committing a single act of fraud involving $100.

The Department’s top criminal prosecutor, Lanny Breuer, publicly stated his paramount concern about the fraud epidemics that devastated our nation – he was “losing sleep at night over worrying about what a lawsuit might result in at a large financial institution.” That’s right – he was petrified of even bringing a civil “lawsuit” – much less a criminal prosecution – against “too big to prosecute” banks and banksters. I lose sleep over what fraud epidemics the banksters will lead against our Nation. The banksters have learned to optimize “accounting control fraud” schemes and learned that they can grow immensely wealthy by leading those fraud epidemics with complete impunity. None of them has a criminal record and even those that lost their jobs are overwhelmingly back in financial leadership positions. In the aftermath of the savings and loan debacle, because of the prosecutions and criminal records of the elites that led those frauds, no senior S&L fraudster who was prosecuted was able to become a leader of the fraud epidemics that caused our most recent financial crisis.

We have known for decades that repealing the rule of law for elite white-collar criminals and relying on corporate fines always produces abject failure and massive corporate fraud. We have known for millennia that allowing elites to commit crimes with impunity leads to endemic fraud and corruption. If the Department wants to restore the rule of law I am happy to help it do so. We have known for over 30 years the steps we need to take to succeed against elite white-collar criminals through vigorous regulators and prosecutors. We must not simply prosecute the current banksters, but also prevent and limit future fraud epidemics through regulatory and supervisory changes. I renew my long-standing offers to the administration to, pro bono, (1) provide the anti-fraud training and regulatory policies, (2) help restore the agency criminal referral process, and (3) embrace the whistleblowers and the scores of superb criminal cases against elite bankers that they have handed the Department on a platinum platter. We can make the “new” Justice Department policy a reality within months if that is truly Obama and Lynch’s goal.