Verdict Is in: Wall Street Gets Off Scot-Free

NEW YORK (TheStreet) -- As I watched the HBO movie "Too Big to Fail" Monday night, enjoying the taut script and fine performances, I have to admit I was left with an empty feeling -- as I was after watching a recent indie film called "Meek's Cutoff," which basically has no ending. It just sort of stops. That film, like "Too Big to Fail," does not have an essential ingredient of any satisfying drama: resolution. The tying up of loose ends.

This is not a verdict on "Too Big to Fail" as a movie, or the book with the same name. No, it's a verdict on Eric Holder and Preet Bharara, and all of their colleagues at the Justice Department and the Office of U.S. Attorney for the Southern District of New York. It's a verdict on Mary Schapiro and the Securities and Exchange Commission. It's a verdict on everybody with a badge and/or gun and/or subpoena power, and jurisdiction over Wall Street crime. That would cover just about the entire federal and state law enforcement apparatus from here to Nome, and include a once-robust Manhattan District Attorney's Office, which used to prosecute penny-stock hoods but can no longer find scoundrels when they wear pinstripes.

You -- all of you -- blew it.

It's official, guys: We're so distant from the financial nightmare of 2008 that it actually has been made into an HBO movie, for heaven's sake. Yet not a single major criminal prosecution has emerged from anything that happened leading up to the financial crisis. In November 2009, Holder said: "We will be relentless in our investigation of corporate and financial wrongdoing, and we will not hesitate to bring charges." But the only thing more frustrating than Holder and Bharara breaking that promise is seeing the Republicans -- who sabotaged financial regulation for years and emasculated the SEC -- making political hay over it. (See this breathtaking hypocrisy.)

Yes, I realize all the usual counterarguments -- that criminal cases must be proven beyond a reasonable doubt, and that it's much more fun, not to mention less politically perilous, to prosecute Sri Lankan insider traders than it is to conduct meaningful criminal investigations of powerful Wall Street banks. But none of them seem especially convincing. As Peter Henning, a professor at Wayne State University, told Bloomberg the other day, the failure to bring a single major case is utterly at variance with the record of past financial scandals, such as the S&L debacle and Enron.

The latter scandal, it must be remembered, broke when George W. Bush was president. Is failure to prosecute Wall Street part of the "change you can believe in" that Obama promised? I don't always agree with Matt Taibbi, but he makes a valid point when he argues that Goldman Sachs ( GS) lied to Congress and to the public -- and have gotten away with it. Taibbi believes there is an institutionalized double standard, because prosecutors and regulators someday hope to work for Goldman Sachs. I'm afraid that I have to agree with him, because no other explanation makes sense for the failure to make cases on a single blessed thing other than unrelated charges of insider trading.

That's why Eliot Spitzer was such a superb prosecutor, and why he is so sorely missed. Spitzer, the son of a real estate tycoon, was too rich to care about getting a job on Wall Street. As he told Taibbi, he'd be dropping subpoenas on Wall Street right and left. He'd be embarrassing the hell out of Schapiro's SEC and Bharara's insider-trading-happy U.S. Attorney's office.

Well, maybe "embarrass" is too strong a word to use to describe the shame-bereft SEC. Just read the new book by Gretchen Morgenson, "Reckless Endangerment," excerpted by the New York Times on Sunday. Read about how the SEC disregarded repeated warnings from short-seller Marc Cohodes about the subprime mortgage factory Novastar Financial, now in bankruptcy. Bring a barf bag.

There is no ray of hope here. Yes, I know, there is activity on the state front. The New York State Attorney General, Eric Schneiderman, has been throwing around some subpoenas of his own, snaring JPMorgan Chase ( JPM), UBS ( UBS) and Deutsche Bank ( DB) in a probe of mortgage securitization practices. MBIA ( MBI), Ambac Financial ( ABK), Syncora Holdings (SYCRF) and Assured Guaranty ( AGO) are also said to be in in Schneiderman's gun sight .

And then we have word that California is creating a mortgage fraud task force, with 17 lawyers on the case. That's really wonderful that all this is happening three years after the biggest financial crisis in the history of the nation. Where were California and New York three years ago? Why weren't they turning up the heat on Holder, Schapiro and Bharara when it might have done some good?

I may still be proven wrong, and I hope I am. But it appears that the most that emerged from the financial crisis was the Goldman Sachs SEC settlement for its venture with John Paulson's hedge fund, and the civil case against Angelo Mozilo of Countrywide Financial. Prosecutions for corporate fraud are actually down 58% since 2003, when such things began to be tracked by George Bush's Justice Department.

That's right: Barack Obama looks like a soft-on-corporate-crime chump in comparison to his predecessor. That seems to be happening across the board, and not only with the big Wall Street banks.

However, it's not a total loss. I have a great idea for a sequel to "Too Big to Fail." It can be called: "Too Big to Prosecute."

Gary Weiss has covered Wall Street wrongdoing for almost a quarter century. His coverage of stock fraud at BusinessWeek won many awards, and included a cover story, �The Mob on Wall Street,� which exposed mob infiltration of brokerages. He uncovered the Salomon Brothers bond-trading scandal, and wrote extensively on the dangers posed by hedge funds, Internet fraud and out-of-control leverage. He was a contributing editor at Conde Nast Porfolio, writing about the people most intimately involved in the financial crisis, from Timothy Geithner to Bernard Madoff. His book "Born to Steal" (Warner Books: 2003), described the Mafia's takeover of brokerage houses in the 1990s. "Wall Street Versus America" (Portfolio: 2006) was an account of investor rip-offs. He blogs at garyweiss.blogspot.com.

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