If you've been skeptical about the DoJ’s hype on ‘ever-widening investigations into financial fraud that caused the financial crisis’, it appears that to date your cynicism has been justified. 

On Dec. 6 U.S. Attorney General Eric Holder held a news conference to praise the results of Operation Broken Trust, part of Obama's Financial Fraud Enforcement Task Force  which he called “a critical step forward in law enforcement’s work to protect American investors.”   Operation Broken Trust began Aug. 16 and  Holder announced that it’s resulted in 231 cases against 343 criminal defendants as of Dec. 1. All told there were 64 arrests, 158 indictments or complaints, 104 convictions and 87 sentencings, according to the Justice Department’s tally. Holder also credited the operation with 60 civil suits against 189 defendants.  He hearts the many agencies involved in the operation.

He calls the financial losses the criminal cases alone “staggering” at $8.3 billion.  Of course, if you divide that amount by the number of cases and defendants, you get…well, chickenfeed as compared to the trillions of dollars of  fraud at the heart of the recent economic meltdown.

Now we all want the public to have more faith that they are playing on level playing fields when they invest, so it’s hard to complain that investigations and prosecutions are happening, and they are netting some sick fraud schemes and Bad Folks.  But by and large, when I started poking around for opinions about the scope and verisimilitude of the operation as to targets, I found barely disguised mockery, frustration, anger, and dismissal from the folks who believe that the Big Guns in the field of economics are vocal about the need for true investigations and prosecutions of The Big Players in order for the economy to recover: Joseph Stiglitz, William Black, Chris Whalen, James Galbraith, and many others.

So if this all looks like a pose, it seems to be.  We want to know why none of the Big Banks have been touched, and only relative Small Fry are in the task force’s cross-hairs.  While discussing Broken Trust, Phil Trupp writing at Huffpo claims that so far the investigations ‘would make Machiavelli smile’.  His story of a recent SEC prosecution is discouraging, to say the least:

“For example, one of the putative insider scores recently hailed by the SEC was the indictment of a group of blue collar railway workers** who, observing various teams of "suits" taking notes and huddling with rail executives, formed an investment club and bet the railroad operation was up for sale. They were right, and the workers made about $1 million on their hunch. The SEC said these employees were privy insider information. Soon afterward, New York Times columnist Andrew Ross Sorkin wondered if the SEC might be Goliath stomping on an innocent David. Just exactly what constitutes insider trading, Sorkin asked? He believes the rail workers were acting on the obvious and playing a hunch -- hardly a criminal offense.”

Gotta go out and get those rail workers, though.

 Jesse Eisenger of ProPublica quotes lead prosecutor of Enron, John Hueston as asking,  

“Have they committed the resources in the right place? Do these scandals warrant apparent national priority status?  Nobody from Lehman, Merrill Lynch or Citigroup* has been charged criminally with anything. No top executives at Bear Stearns have been indicted. All former American International Group executives are running free. No big mortgage company executive has had to face the law.

How about someone other than Fabrice Tourre, known as the Fabulous Fab, at Goldman Sachs? How could the Securities and Exchange Commission merely settle with Countrywide’s Angelo Mozilo, and for a fraction of what he made as chief executive?

The world was almost brought low by the American banking system, and we are supposed to think that no one did anything wrong?”

Eisenger continues:

“The most popular reason offered for the dearth of financial crisis prosecutions is the 100-year flood excuse: The banking system was hit by a systemic and unforeseeable disaster, which means that, as unpleasant as it may be to laymen, it’s unlikely that anyone committed a crime.

Or, barring that wildly implausible explanation (because, indeed, many people saw the crash coming and warned about it), the argument is that acting stupidly and recklessly is no crime.

As I ride the subway every morning, I often fantasize about criminalizing stupidity and fecklessness. But alas, it’s not to be.

Andrew Ross Sorkin at the Times seems almost amused by Holder’s claim that Wall Street and corporations are taking heed of Holder’s strong message:

“It all sounded quite important, and the program’s slogan is pretty catchy. But after you get past the pandering sound bites, a question comes to mind: is anyone in the corner offices of Wall Street’s biggest firms or corporate America’s biggest companies paying any attention to Mr. Holder’s “strong message”?

Of course not. (I actually called some chief executives after Mr. Holder’s news conference, and not one had heard of Operation Broken Trust.)

That’s because in the two years since the peak of the financial crisis, the government has not brought one criminal case against a big-time corporate official of any sort.

Instead, inexplicably, prosecutors are busy chasing small-timers: penny-stock frauds, a husband-and-wife team charged in an insider trading case and mini-Ponzi schemes.”

Jonathan Weil writing for Bloomberg spent time digging into the criminal prosecutions, and found some irregularities, and noticed that some of the cases had begun well before the creation of the task force.  He says: “By all outward appearances, it seems the Justice Department either doesn’t want to prosecute systemically important frauds, or doesn’t know how. Or maybe it’s both. It wasn’t always this way. More than a thousand felony convictions followed the savings-and-loan scandal of the 1980s and early 1990s. Some of the biggest kingpins, such as Charles Keating of Lincoln Savings & Loan, went to jail. With this latest financial crisis, there’s been no such accountability. Operation Broken Trust may be a fitting name. Unfortunately it’s for all the wrong reasons. The public already knows not to trust the government. Flimflam P.R. stunts such as this one at least offer us a useful reminder of why.”

* ProPublica highlighted on November 18 that the SEC will investigate Citigroup’s CDOs as part of the run-up to the financial crisis.

** All bolds mine.

(to be cross-posted at MyFDL.com)