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U.S. Attorney Aims Low With Trading Probe

Stocks in this article: GS JNS

If I were a fly on the wall at Preet Bharara household's Thanksgiving dinner, I can imagine what I'd have seen amid the turkey, cranberry sauce and fixings. I can see it now: The U.S. attorney for the southern district of New York, having taken absolutely no steps against any of the major players in the greatest financial crisis since the Great Depression, giving thanks -- for insider trading.

I know, I probably should be joining in the media frenzy over the Great Upcoming Hedge Fund Insider Trading Scandal of 2010-2011. But something about the whole thing bugs me. For one thing, it is the subject of more intensive leaking since the South Fork Dam started pouring its contents over Johnstown in 1889. Secondly, and most importantly, it has a veritable stench of being the prosecutorial equivalent of a consolation prize. Sort of the public being given a lovely parting gift, when what people really want is the grand prize: punishment for the perpetrators of the financial crisis that has wreaked havoc with the economy and is pushing thousands of people out of their homes.

Let's take a look at Preet Bharara's track record on the actions of the big banks that have surfaced so far in actions by other branches of the federal government. The Goldman Sachs (GS) scheme to allow the Paulson hedge fund to manufacture a synthetic CDO -- nothing. The Lehman Brothers asset-shifting scheme -- nothing. As I've pointed out many times before, most recently in this space last month, the major perpetrators of the financial crisis are enjoying monumental success, just as if there never had been a financial crisis or TARP program in the first place. There was talk a few weeks ago of massive consequences from the foreclosure mess, and I guess that's always possible, but the Bharara track record is not assuring in that regard.

So, instead, we have the massive Upcoming Insider Trading Scandal, which so far has been mainly played out in the media. I don't have any objection to media orchestration, per se, but this particular chorus line seems straight out of Busby Berkeley.

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