The bipartisan panel appointed by Congress to investigate the financial crisis has concluded that several financial industry figures appear to have broken the law and has referred multiple cases to state or federal authorities for potential prosecution, according to two sources directly involved in the deliberations.

The sources, who spoke on condition they not be named, declined to identify the people implicated or the names of their institutions. But they characterized the panel's decision to make referrals to prosecutors as a significant escalation in the government's response to the financial crisis. The panel plans to release its final report in Washington on Thursday morning.

In the three years since major lenders teetered on the brink of collapse, prompting huge taxpayer rescues and amplifying an already painful recession into the most punishing downturn since the Depression, public indignation has swelled while few people who played prominent roles in the crisis have faced legal consequences.

That may be about to change. According to the law that created the Financial Crisis Inquiry Commission, the panel has a responsibility to refer for prosecution any evidence of lawbreaking. The offices that have received the referrals -- the Justice Department, state attorneys general, and perhaps both -- must now determine whether to prosecute cases and, if so, whether to pursue criminal or civil charges.

Though civil charges appear a more likely outcome should prosecution result, one source familiar with the panel's deliberations said criminal charges should not be ruled out.

The commission's decision to refer conduct for prosecution underscores the severity of the activities it has uncovered and plans to detail in its widely anticipated final report, the sources said.

A spokesman for the commission declined to comment. "I cannot comment on the commission's report or its activities until January 27th," said the spokesman, Tucker Warren.

When the 10-member panel was first convened in late 2009, participants emphasized that they did not intend to focus on prosecution, but were rather intent on illuminating the root causes of the crisis.

Indeed, the fact that the body has opted to make referrals adds an unexpected coda to a proceeding that some observers have written off as just another bit of Washington stagecraft aimed at generating headlines.

"Few will notice its absence," said Michael Perino, a law professor at St. John's University School of Law in New York and an expert in financial history, in an opinion piece published in the New York Times last October. It "had no discernible influence over the financial reforms." He added: "How did this commission fail so badly?"

But the decision to refer cases for potential prosecution could provoke a different conclusion: It may yet satisfy public craving for what Treasury Secretary Timothy Geithner once referred to as the "very deep public desire for Old Testament justice."

The commission's report is supposed to detail the definitive causes of the crisis. Over the course of the past year, the panel has interviewed more than 700 witnesses, reviewed millions of pages of documents, and held 19 days of public hearings across the country.

Among those who testified were the heads of the nation's largest financial institutions -- all of them recipients of multi-billion dollar public bailouts. Among those who testified were Lloyd Blankfein, chief executive of Goldman Sachs Group Inc.; Jamie Dimon, chief of JPMorgan Chase & Co.; and Robert Rubin, a former Goldman chief and Clinton administration Treasury Secretary, who later held a prime executive chair at Citigroup. The panel also questioned Federal Reserve Chairman Ben Bernanke and his predecessor, Alan Greenspan.

The commission drew on testimony from less prominent senior executives with intimate knowledge of how Wall Street engaged in modern-day financial alchemy, turning mountains of dubious mortgages into seemingly rock-solid investments rated as safe as American Treasury bonds.

Richard Bowen, former chief underwriter for Citigroup's consumer-lending unit, testified that, in the middle of 2006, he discovered more than 60 percent of the mortgages the bank had purchased from other firms and then sold to investors were "defective," meaning they did not satisfy the bank's own lending criteria.

Keith Johnson, former president of Clayton Holdings, one of the top mortgage research companies, testified that some 28 percent of the loans given to homeowners with poor credit examined by his firm for Wall Street banks failed to meet basic standards. Yet nearly half appear to have been sold to investors regardless, he added.

The commission has been dogged by partisan sniping within its ranks and high staff turnover. But the referrals may mollify criticism that the panel was more about conveying the illusion of an investigation than conducting the real thing.

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