Geoffrey Graber '95: Investigating the Banks

In the movie Wall Street, Michael Douglas’s character, Gordon Gekko, famously proclaims, “Greed is good!” But Geoffrey Graber ’95 says greed that unfairly and purposefully disadvantages consumers is not okay.

In recent years, Graber and his team at the U.S. Department of Justice have worked tirelessly to hold big financial institutions accountable for their part in the 2008 financial crisis. His work has paid off, with the department winning several historic settlements.

After graduating from the University of Southern California School of Law, Graber set his sights on working at the Department of Justice (DOJ). “It seemed like the department was a place I could do some good and make a real difference while at the same time work on some really interesting cases,” he says.

In May 2009, he got his wish—he became counsel to the assistant attorney general for the DOJ’s Civil Division. When Graber first started, he had a variety of responsibilities. Of particular interest and importance was providing advice and assistance with Guantanamo detainee habeas considerations.

But his attention soon turned to holding financial institutions accountable for their role in the 2008 financial crisis. “When I went to the department, we were coming off the peak of the crisis,” says Graber, who was tasked with determining how the civil division could address issues relating to the financial crisis.

After conducting a review of the department’s civil enforcement toolbox and conferring with colleagues in the department and in U.S. attorneys general offices around the country, Graber proposed the groundbreaking use of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) to investigate Standard & Poor’s rating of asset-backed securities. “The FIRREA statute had been used before but never on the scale that we used it in the S&P case,” says Graber. The investigation led by Graber determined that S&P, the largest credit rating agency in the world, had artificially inflated the ratings of hundreds of billions of dollars’ worth of structured securities and collateralized debt obligations (CDOs), which led to catastrophic losses by investors. Civil charges filed in February 2013 resulted in S&P paying $1.375 billion in February 2015 to resolve the lawsuits, the first and largest enforcement action filed by the Department of Justice against a financial institution in connection with the financial crisis.

“It was the first major action and certainly demonstrated the resolve of the department and of the attorney general to use all available tools to go after wrongdoing in the financial markets,” says Graber.

“While the S&P case was a lawsuit filed by the Department of Justice, more than a dozen state attorneys general also filed suit,” says Graber. “What you saw in S&P was an example of what can be accomplished when the federal government and the state attorney general community work together. I’m very hopeful that it is something we will continue to see in the future.”

Graber then went on to direct the department’s Residential Mortgage-Backed Securities Working Group. The group’s investigations found that banks misrepresented the quality of the mortgage loans that they were selling to investors. The poor quality of the loans led to tremendous losses and countless foreclosures, says Graber.

“This impacted consumers and homeowners around the country because banks were selling hundreds and hundreds of billions of dollars of these mortgage bonds to pension funds, federal home loan banks, and other large institutional investors that held the investments of ordinary Americans,” says Graber. “And by continuing to sell these mortgage bonds notwithstanding their poor quality, the banks helped facilitate an overheated housing market filled with a lot of poorly underwritten loans. When the economy turned and those loans couldn’t be repaid, this impacted the neighborhoods where those loans were underwritten as well as the investors in those bonds.”

The DOJ investigations resulted in the recovery of more than $36 billion, including a record-breaking $16.65 billion settlement from Bank of America (the largest settlement with a single entity in American history), $13 billion from J.P. Morgan, and $7 billion from Citibank. In each of the three settlements, there was a consumer relief component including loan forgiveness, loan modifications, and reduction of the principal on individual home mortgages.

While Graber developed the plan that determined which bank investigations to prioritize as well as which legal theory to pursue, he is modest about his accomplishments. “If there is any mastermind of these settlements, it’s the line prosecutors and investigators and analysts who were working around the clock to build these cases,” he says. “I helped the investigative teams succeed.”

Graber says, “Every single person in the country has been personally impacted or knows somebody personally impacted by the financial crisis. The settlements are a good thing for the people who received relief but also for everybody, including Wall Street. When people are able to stay in their homes and avoid foreclosure, it’s good for the homeowner, community, and banks that are holding those mortgages because the banks don’t want the homes to go into foreclosure, either. In that respect, the department and the banks were on the same page.”

In October 2015, Graber returned to the private sector as a partner with the Washington, DC, office of Cohen Milstein Sellers & Toll PLLC, but his desire to work on issues that make a difference hasn’t changed. Graber now focuses on consumer protection, product safety, whistleblower/false claims, and securities fraud.