Where’s the sheriff?

Our theme today is accountability.

We begin with a revealing story in the New York Times by Gretchen Morgenson and Louise Story about why, after a financial crisis that nearly crashed the economy and generated hundreds of billions in losses, there hasn’t been a single prosecution of a high-profile player on Wall Street.

By contrast, after the savings and loan debacle of the 1980’s investigators referred more than a thousand cases to prosecutors, and more than 800 bank officials went to jail.

Looking into what didn’t happen this time, Morgenson and Story report that in 2008 the Justice Department and the FBI scaled back plans to investigate mortgage fraud. And there’s this:

“The Securities and Exchange Commission adopted a broad guideline in 2009 — distributed within the agency but never made public — to be cautious about pushing for hefty penalties from banks that had received bailout money. The agency was concerned about taxpayer money in effect being used to pay for settlements, according to four people briefed on the policy but who were not authorized to speak publicly about it.”

I’m looking forward to Morgenson’s forthcoming book on what regulators didn’t do in the financial crisis. Read the rest of her current story here.

Second, you might remember a fascinating story that aired on the public radio program This American Life a year ago which dug deeply into the machinations of a hedge fund called Magnetar. The story was a collaboration of the investigative reporting non-profit Pro Publica and NPR’s Planet Money team. It suggested that Magnetar was deliberately packaging highly risky mortgage loans to sell to investors, while at the same time using derivatives called credit default swaps to bet that the mortgage instruments would fail.

Pro Publica now reports that the Securities and Exchange Commission may finally file a lawsuit in connection with the Magnetar deal.

You can listen to the April, 2010 radio story, which includes the original show tune “Bet Against the American Dream” here. Read the Pro Publica story about the possible SEC action here.

Finally on the local scene, it’s heartening to see that Philadelphia City Council has acted to close a loophole in the city’s campaign finance law which allowed political committees to circumvent the law’s annual $10,600 limit on contributions to a candidate.

Reporter Bob Warner has detailed how several committees associated with and funded by Local 98 of the International Brotherhood of Electrical Workers made large contributions to at least two candidates.

One the beneficiaries was City Councilman Bill Green, who’d sought to delay passage of legislation closing the loophole. Green said he only wanted to strengthen the bill by amending it with clearer language.

I expect the fact that Council decided to go ahead and pass the bill quickly has something to do with the fact that Warner published his second story on the loophole and the union’s spending Thursday, about a month before members face voters in the May 17 primary.

Mayor Nutter has already signed the legislation.