NEW YORK ( TheStreet) -- President Obama announced during his State of the Union address Tuesday night that he will create a "special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis."
Many of us are frustrated that we haven't seen any major prosecutions of financial criminals as a result of the reckless behavior that devastated the economy and put millions of people out of jobs. By limiting his focus to abusive lending and packaging of risky mortgages, Obama may already be off to a poor start.
The bipartisan deregulatory fervor that has gripped Washington D.C. since the Reagan era is probably at least as much to blame, as people like former Citigroup (C - Get Report) chief Sandy Weill managed to convince Congress to dismantle regulations like the Glass-Steagall Act that had limited the power and growth of the financial sector. Meanwhile, advisers to President Clinton like ex- Goldman Sachs (GS)chief Robert Rubin and Harvard hedge fund man Larry Summers allowed JPMorgan Chase (JPM - Get Report), Goldman Sachs and other financial giants to win a free pass for the multitrillion dollar credit default swaps market, necessitating a $170 billion bailout of AIG (AIG). Though they are all Democrats, their main philosophical twin in Congress during the mid to late 1990's was Texas Senator Phil Gramm.
The Securities and Exchange Commission nonetheless should have been actively sticking its nose into all manner of financial crimes during the bull market, but do-nothing Chairmen like Christopher Cox and a well-oiled revolving door between the SEC's enforcement division and the general counsel's office of top Wall Street firms ensured no big fish would ever end up in the government's net.Obama's special unit may indeed have teeth, since, according to the Huffington Post it will be led by New York's Eric Schneiderman, maybe the single-biggest thorn in the side of Wall Street at the moment. The move by Obama is surprising if you consider that just five months ago Obama was reportedly leaning on Schneiderman to back off banks. Here are three scoundrels Obama's unit should target.