Why has no one gone to jail for the fraud and excess that brought the world economy to the brink, robbed millions of their savings and cost more millions jobs?

Woody Guthrie: "Some men rob you with a fountain pen..."

In receiving the Academy Award for his excellent documentary, Inside Job, on the 2008 financial meltdown that still haunts our broken economy, director Charles Ferguson brought a bit of cold water to the Oscar ceremonies last February:

“Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that’s wrong.”

Ferguson raised an important question. At least part of the answer is addressed in the context of an extensive New Yorker article by George Packer on the prosecution of the Wall Street insider trading case against Raj Rajaratnam, head of Galleon hedge fund, which isn't directly related to the 2008 crisis.  The relevant sections from Packer's piece that speak to the lingering question raised by Ferguson and his documentary's investigation into the larger crisis follow:

Fraud abetted the financial crisis, from the marketing of deceitful financial products to the banks’ concealment of losses after the housing market collapsed. Then why are no executives in jail? One reason is that criminal law often founders in what prosecutors call a “dead-body case.” During the mortgage bubble, the possible crimes were committed before any investigations had begun. By the time the government could have gathered enough evidence to obtain wiretaps, any incriminating conversations would have long since taken place.

The Department of Justice also played a role in inhibiting vigorous prosecutions. In 2008, the department, under President George W. Bush’s Attorney General, Michael Mukasey, distributed the major new investigations across different offices. Countrywide went to the U.S. Attorney’s office in Los Angeles; Washington Mutual was claimed by Seattle; A.I.G. was pursued out of Washington, D.C., with the coöperation of New York’s Eastern District, in Brooklyn. Lehman Brothers was split among New Jersey and the Eastern and Southern Districts of New York. The Southern District, with its superior experience and expertise in accounting fraud, was largely cut out. Neil Barofsky, a former Southern District prosecutor who left the office in December, 2008, to become the first inspector general of the Troubled Asset Relief Program, considers this a mistake. “The Department of Justice made a decision that decreased the probability that those cases are going to get made,” he said. He suggested that the attorneys in the Southern District weren’t happy about missing the chance. “Getting the C.E.O. of a major bank is not a career killer,” he said. “It’s a career maker.”

At the time, the Southern District was between leaders, and the attorneys in its securities unit had their hands full with other cases, including Galleon. (Prosecutor) Bharara insists that the lack of charges stemming from the meltdown can’t be blamed on insufficient resources. He told me, “If the well is dry, a thousand more people aren’t going to get you water in that well.” But, given the targets in question—huge banks, well-insulated executives, intricately structured financial products, tens of millions of knotty documents—it’s unlikely that a federal prosecutor’s office, staffed by generalists and operating under standard procedure, which is to wait for cases to come in, could have made serious headway. Several financial-fraud experts told me that a task force, made up of assistant attorneys adept at financial investigations, should have been created in key districts, especially in New York’s Southern District, and given two or three years to investigate a single bank. These teams could have functioned almost like special prosecutors, with an open-ended mandate, and worked in tandem with agencies like the S.E.C. and the F.B.I., as in the Galleon case. These prosecutors might have had the time and the expertise to recognize a subtly incriminating e-mail or spreadsheet. Such a major initiative needed to come from Washington, but investigating Wall Street’s big banks seems not to have been a top priority. In November, 2009, the Obama Administration announced the creation of an interagency Financial Fraud Enforcement Task Force. Its principal accomplishments to date have been press releases claiming credit for cases that often predated the financial crisis and involve low-level Ponzi and mortgage-fraud schemes.

In the spring of 2009, Congress authorized a hundred and sixty-five million dollars to be spent on more vigilant fraud enforcement. According to a recent article in the Times, only thirty million or so was spent. In December, 2009, Senator Ted Kaufman, of Delaware, as a member of the Judicial Committee, held an oversight hearing on financial-fraud prosecutions. A Brooklyn jury had just acquitted two Bear Stearns hedge-fund managers of fraud and conspiracy, in the only criminal case related to the major players in the financial crisis. At the hearing, Kaufman urged Justice Department officials not to be deterred by the unwelcome verdict. “It is just very hard for me to understand why there haven’t been more indictments,” Kaufman, whose Senate term ended last November, told me. “I am incredibly disappointed.”

Kaufman’s chief of staff at the time, Jeff Connaughton, was even more scathing toward the Obama Administration. Attorney General Eric Holder, he noted, “said in his swearing-in that he would make it a priority. We thought we were making sure that they were doing the right thing, and they said all the right things in hearings, and nothing happened. I feel gamed by it.”

...nearly three years after the financial crisis, Wall Street still relies on reckless practices to create wealth. An investment banker recently described the meltdown, with some chagrin, as “a speed bump.” The S.E.C. remains so starved of resources that its budget this year falls short of (the indicted hedge fund director) Raj Rajaratnam’s net worth at the time of his arrest. The agency lacks the technology to keep track of the enormous volume and lightning speed of algorithmic trades, like the ones that caused last May’s “flash crash” of the stock market. The market has become more of an exclusive gambling club for the very rich than a level playing field open to the ordinary investor.

As for the larger financial system, in Washington, D.C., implementation of the Dodd-Frank regulatory reform law has been slowed, if not yet sabotaged, by lobbying on the part of the big banks and a general ebbing of will among politicians. Neil Barofsky, the former inspector general of TARP, said, “Is Tim Geithner going to have the political will to take on the size and interconnectivity of the largest banks? Nothing in his previous career suggests he would.” Barofsky went on, “It is a remarkable failure of our system that we’ve not addressed the fundamental problems that brought us into the financial crisis. And it is cynical or naïve to imagine it won’t happen again.”