CNN passes along a “no, really this time, seriously” promise that the RMBS working group, tasked with looking into securitization fraud, will soon make a major announcement.

A joint federal and state probe into mortgage-backed securities fraud is close to “significant action,” with a possible announcement in coming weeks or months, according to a source familiar with the probe [...]

Members of the Residential Mortgage Backed Securities working group, which includes attorneys from the Justice Department, the Securities and Exchange Commission and the New York Attorney’s General’s Office, declined to say who or what they’ve been investigating, citing the sensitive nature of ongoing investigations.

But officials at all those agencies say progress is underway.
“Work is being done right now by state and federal working group members across the country on active investigations,” said Justice spokeswoman Adora Andy. “Although these complex cases can be time consuming and challenging, the resources, enthusiasm and organization brought by the members of the RMBS Working group have already resulted in substantial strides toward that goal.”

Mm-hm.

At the same time, New York Attorney General Eric Schneiderman delivered seven subpeonas to banks suspected of participating in the Libor interest rate-rigging scandal. We know that the financial fraud task force, the large umbrella group, is a repository for any ongoing financial fraud-related investigation. Am I cynical enough to think that, when the Libor actions come down, that will be conflated with the securitization fraud mandate of the RMBS working group, and that any investigations into actions during the housing bubble will be summarily dropped and forgotten? Why yes, I told you that a month ago.

You just have to look in front of you to understand the difference between the fraud that regulators are self-sanctioned to go after and the fraud they aren’t. Libor is such an obvious fraud that they had no choice. When New York’s Department of Financial Services went public on Standard Chartered Bank’s money laundering activities, federal regulators had to follow suit; as a result the bank could face $1 billion in fines when all is said and done. By the way, the New York DFS has no authority to prosecute, only the state Attorney General – that guy Eric Schneiderman – could single out individuals for prosecution there.

I mean, if you’re not going to prosecute MF Global, who literally stole money from its clients to pay off its debts, I don’t see how you can have any hope about any prosecutions going forward. The notion that “chaos and porous risk controls at the firm” caused the theft of funds is really over the top.

It does look like, as Matt Taibbi writes, that the message has come down on high to shut the door on any actions against banks’ role in the financial crisis. I also think this is true:

Our prosecutors and regulators have basically admitted now that they only go after the most obvious and easily prosecutable cases.

If the offense committed doesn’t fit the exact description in the relevant section of the criminal code, they pass. The only white-collar cases they will bring are absolute slam-dunk situations where some arrogant rogue commits a blatant crime for individual profit in a manner thoroughly familiar to even the non-expert portion of the jury pool/citizenry.

But here’s the thing: most of the crimes Wall Street people commit involve highly specific, highly individualized transactions that won’t fit Eric Holder’s bag of cookie-cutter statutory definitions. That is not the same thing as saying they’re not crimes. They are: the crimes of the crisis period were and are very basic crimes like fraud, theft, perjury, and tax evasion, only they’re dressed up in millions of pages of camouflaging verbiage [...]

You know that look a dog gives you when you show it something confusing, like an electric razor or a lawn sprinkler? That’s the look federal prosecutors give when companies like Goldman wave their attorneys’ sanctifying opinions at them. They scratch their heads and say: “Oh, wow, well since this was signed in Australia by three millionaire lawyers wearing magic invisibility cloaks, it really isn’t fraud! They’re right!”

As one high-profile attorney currently working on a closely-watched case involving a Wall Street bank put it to me yesterday: “With these Justice guys, everything the Wall Street lawyers say makes perfect sense to them, no matter how dumb it is.”

This is part of the “stupid or evil” conversation we often have in the blogosphere. But both things can be true simultaneously. You can have overmatched Justice Department attorneys afraid to go into trial when the subject matter is at all complex, AND the higher-ups reluctant to prosecute because they want to let their pals on Wall Street get away with it. In fact, if you’re an evil higher-up, it would make sense to designate investigations to a stupid functionary. The two go together.