Preet Bharara, the U.S. Attorney prosecuting the insider trader cases, is quoted in a recent New Yorker article as saying that a lack of manpower was the reason that authorities hadn't prosecuted more people involved in the financial crisis: "If the well is dry," he said, "a thousand more people aren't going to get you water in that well."
Of course, that's absurd. New evidence emerges nearly every day that the well is not dry and that numerous financial firms engaged in illegal behavior during the boom. In particular, there is plenty of evidence that firms misled investors about the quality or risks associated with mortgage-backed securites -- and that these lies had devastating effects as investors lost fortunes.
Last year, Goldman Sachs settled with the government for $550 million for failing to share damaging information about collateralized debt obligations it sold to clients even as it helped a hedge fund bet against the securities underlying those CDOs. And just last week, the government settled with J.P. Morgan in a similar case. Also last week, the SEC reached a $200 million settlement with the financial firm Morgan Keegan and Company, and two of employees, James C. Kelsoe Jr. and Joseph Thompson Weller, for misleading investors about the true value of mortgage-backed securities in five of its funds.
This week brings yet more revelations: According to the Wall Street Journal, the SEC is broadening their probe against Stifel Financial for pitching dubious CDOs to a school district in Wisconsin that lost tens of millions of dollars. "The districts were defrauded in these transactions and have spent nearly three years proving how and why," said C.J. Krawczyk, a Milwaukee lawyer representing the schools.
