Judging by the help-wanted notice that Loretta Lynch posted last year, the freshly confirmed U.S. Attorney General intends to pick up where her predecessor left off and make lenders pay for their role in the subprime crisis.
The U.S. Attorney's office in Brooklyn, New York, which Lynch led twice, said in September that it was hiring as many as seven lawyers to go after corporate fraud, including "pursuing those responsible for misconduct related to mortgage-backed securities."
Seven months later, Lynch has taken over the Justice Department from Eric Holder, who spearheaded three multibillion-dollar settlements with banks for selling faulty mortgage-backed securities. Lynch's Brooklyn office had a hand in the Bank of America Corp. case, winning the biggest settlement ever against a U.S. corporation. As she inherits several remaining mortgage-related investigations against Goldman Sachs & Co. and other banks, former colleagues say they expect her to continue Holder's efforts to extract settlements from lenders that helped fuel the housing bubble and subsequent crash.
"Given her background and some of the mortgage-fraud cases that she's prosecuted up in New York, I would expect that she's not going to back away from what's already on the table," said Clifford Rossi, finance professor at the University of Maryland's Robert H. Smith School of Business in College Park.
Lynch served as the U.S. Attorney for the Eastern District of New York from 1990 to 2001 and then returned in 2010. She has won praise from lawmakers and colleagues for her even-handed approach to cases against big banks. Her reputation as a team player helped in her rise to become the nation's top law enforcer.
"She has good judgment, but is not judgmental," a group of almost 50 former colleagues at Hogan Lovells US LLP said in a January letter to the Senate Judiciary Committee. "She is persistent and sticks to the agenda but she has no hidden agendas. She is fundamentally apolitical."
Some lawmakers and public interest advocates have criticized the government's approach to holding mortgage lenders accountable. The settlements allowed banks to pay money to atone for bad behavior, making financial penalties a cost of doing business. Because the Justice Department has made few attempts to criminally prosecute individuals, these people say, it hasn't created a deterrent from future misconduct.
While much of the criticism has been directed at Holder, Lynch played a central role in one controversial deal, a deferred prosecution agreement struck in 2012 with HSBC Holdings. A federal judge praised the $1.9 billion accord for accomplishing "a great deal" and imposing "significant" measures by requiring the bank to admit wrongdoing.
Senator David Vitter, a Republican from Louisiana, wrote to Holder, asking why Lynch allowed HSBC to sweep some of its bad conduct "under the rug" while avoiding prosecution for laundering money on behalf of Mexican drug cartels and violating U.S. sanctions laws against Iran and other blacklisted nations.
"How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this?" Sen. Elizabeth Warren, a Massachusetts Democrat, asked a few months after the HSBC deal was struck.
Nellin McIntosh, a spokeswoman for Lynch, declined to comment for this story.
In January, at her confirmation hearing, Lynch told senators that she plans to take a "very aggressive stance" in reviewing the conduct of financial institutions that played a role in the subprime crisis.
"Not just past conduct but current and prospective so that we can prevent these types of harms from occurring again," she said.
The Justice Department has led the lawsuits against lenders through the Residential Mortgage Backed Securities Working Group. President Obama created the group in 2009 to coordinate prosecutions of banks that packaged mortgages with flawed underwriting into securities sold to investors. Lynch participates with the group along with many U.S. attorneys as well as state and local law enforcement officials.
The group, which was chaired by Holder, has helped federal and state authorities claim about $39 billion in settlements from the nation's largest banks. JPMorgan Chase & Co.'s $13 billion settlement with the Justice Department in 2013 was surpassed last year by the landmark case against Bank of America.
It agreed to pay almost $16.7 billion to end federal and state probes into mortgage bond sales. Holder announced at a press conference that the agreement constituted the largest civil settlement with a single entity in history.
"We believe this settlement, which resolves significant remaining mortgage-related exposures, is in the best interests of our shareholders, and allows us to continue to focus on the future," Chief Executive Officer Brian Moynihan said in a statement in August.
Holder's pursuit of lenders and the record settlements turned some bankers on Wall Street against him, according to Jaret Seiberg, an analyst at Guggenheim Securities. Holder presided over an acceleration of big bank litigation that has often been counterproductive to helping the economy improve and expanding the availability of mortgage credit, Seiberg wrote in a note when the attorney general announced his resignation last fall.
"Some in the banking sector might applaud the departure of Eric Holder as attorney general," the analyst said.
Lynch arrives at the Justice Department after her Brooklyn prosecutors played a role in the $7 billion settlement with Citigroup Inc. last July. The investigation found that the bank knew it was packaging defective loans into securities it sold, Lynch said.
"We demanded that Citigroup pay a substantial penalty and provide relief to homeowners because the deals it made misrepresented the quality and the characteristics of the mortgage loans they sold," Lynch said at a press conference announcing the deal.
Holder left his successor with major investigations to oversee. Several firms including Goldman Sachs, Deutsche Bank AG and Credit Suisse Group AG have disclosed in regulatory filings that the Justice Department is probing their sales of mortgage-backed securities.
Prosecutors are using the Financial Institutions Reform Recovery and Enforcement Act, which allows the government to seek civil penalties for actions that occurred as long as a decade ago. The statute also permits authorities to go after bank employees as well as institutions.
In February, Holder asked the working group to report within 90 days whether they could develop cases against individuals related to mortgage-backed securities fraud. The report, Holder said in February, "ultimately will be given to Loretta."
David Stevens, president of the Mortgage Bankers Association, said he's hoping Lynch will address another mortgage-related matter: Clarifying when the Justice Department will seek damages from lenders for issuing flawed government-backed loans.
Several lenders, including Bank of America and Suntrust Banks Inc., paid a combined $3.1 billion in fiscal 2014 to settle claims that they defrauded the government by originating loans with underwriting errors.
"We hope Attorney General Lynch will make one of her first priorities an effort to bring a sense of clarity to the Department of Justice's enforcement actions," Stevens said.
The Senate delayed confirming Lynch for five months after many Republicans criticized her support for the president's immigration policy. She can expect to be in the job for the less than two years that remain of Obama's presidency.
"Business as usual is what I would expect," Michael Bresnick, said former head of the Justice Department's financial fraud task force under Holder.
