Financial institutions were formally introduced in 2013 to yet another new formidable banking supervisor: the U.S. Department of Justice.

Welcome DOJ to a crowded regulatory field already subject to laws, rules, regulations and policies administered by no less than 12 primary federal regulatory agencies (and their inspectors general) and more than 50 state and territorial attorneys general, banking, securities and consumer protection agencies. 

The Financial Fraud Enforcement Task Force boasts more than three dozen federal agencies and 10 working groups working on financial fraud cases. And there is, of course, an array of U.S., state and city prosecutors enforcing a variety of criminal laws involving banks. Finally, thanks to the Dodd-Frank Act, the Consumer Financial Protection Bureau and the Financial Stability Oversight Council are also making their mark on financial institution regulation. There are now so many regulatory authorities in bank enforcement cases that the targets often have to pay multiple fines to each agency to settle allegations based on the same set of facts.

With the DOJ's increasing profile as an bank enforcement agency, policymakers should seriously consider whether the benefits of continually increasing the number of regulators and the scope of regulation justifies its impact on the availability and cost of credit in this country.

The DOJ is not unfamiliar to financial institutions.  It has asserted itself for many years in fair lending, money laundering, and False Claims Act cases.  But now it is leading the charge in a variety of new cases against financial institutions. They include: mortgage origination, servicing and securitization; third-party processing and providing services to payday lenders.

In the DOJ's mortgage origination, servicing and securitizing cases, settlements in the tens of billions of dollars – unprecedented amounts in the world of civil money penalties – were reached in 2013. In those cases, the DOJ relied on a little-known authority provided to it in 1989 in the aftermath of the S&L crisis. Congress enacted a section of the Financial Institutions Reform Recovery and Enforcement Act (1833a) to authorize the DOJ to use civil investigation and enforcement powers to "recover a civil penalty" from "whoever violates" certain criminal statutes through activities that harm insured banks.

Most recently, the DOJ has relied upon this authority to compel financial institutions to reach settlements in mortgage security and repurchase; third-party processing and Bank Secrecy Act and suspicious activity report deficiency cases.  In relying on 1833a, in some cases, it has enlarged what was intended to be a tool to hold parties accountable for defrauding financial institutions to one that holds financial institutions accountable for defrauding themselves.

Section 1833a is also a lynchpin of DOJ's "Operation Choke Point," which relies on inhibiting the activities of certain businesses by restricting their ability to legitimate, regulated financial services. This concept is not novel. It underlies the Bank Secrecy Act, which ultimately requires financial institutions to conduct due diligence to understand who their customers are before providing them access to the payments, clearing and settlements systems.  Clearly, individual businesses that engage in fraud or mislead the public have no right to do so, but overly aggressive attempts to regulate them by punishing the banks which provide them services can create difficult standards for all banks. For example, in the third-party payment processing business, the government's prosecutorial theory enlarges the "know your customer" doctrine to the "know your customers' customer" doctrine.

Does a safe and sound banking system require multiple enforcers of the same violators and violations? Does it need the DOJ to enforce civil laws against banks when there are already so many other federal banking agencies that are more knowledgeable about the industry and closer to its operations?  In the case of mortgage origination, servicing and securitization cases, before the DOJ announced its settlements, there had already been multiple enforcement cases brought by bank regulators and private parties that have produced significant recoveries.

Finally, the bank regulatory system has traditionally relied on the professional regulation of financial institutions, operating as much as possible beyond the realm of political allegiance. But will this continue to be the case given the new and broader roles being played by the DOJ, CFPB, Treasury and FSOC? These are untested regulatory changes which are being experimented with on an economy still struggling to return to normality.

The benefits and detriments of these trends will no doubt be debated. While they are, financial institutions will measure and adapt to the new risks they face. That is bound to affect their behavior, as well as the range, cost and availability of financial products and services in America for the foreseeable future. 

Thomas P. Vartanian is chairman of the financial institutions practice at Dechert LLP. He is a former general counsel and special assistant to the chief counsel at two different federal banking agencies.