As I have mentioned in the past, I used to work for the US Securities and Exchange Commission in the late 80's as a low level enforcement attorney.  One of the mantras that I learned from the old timers was the validity of the KISS (Keep it simple, Stupid) theory. Yes, you would investigate the shit out of it, then try to reduce the facts and causes of action to a level that was easily understood by the Courts and the public. The KISS theory usually worked because when you boil it down, the perpetrators of the securities fraud most often started out legitimately, but somewhere along the line the perptrators had to start lying to keep the money flow a-flowing. Figure out when the lying started and you had your fraud case made.

Granted, this is a simplistic description of a process that could be complicated in the way of document compiliation and witness investigation. Plus the Bureaucrats at DC headquarters had a knack for making the simple much more complicated.  It boils down to the will of leadership/management to pursue the tougher frauds.

If the political will is there, the FBI, the NY Attorney General, the Treasury, Fed and the SEC could use their tools to investigate (Can we say "Task Force"?). The SEC accountants/investigators still have the ability and knowhow to obtain the American side of the transactions with the big investment banking firms. Following the large transactions and talking to the right people in the right way (subpoenas and the right dispensation of immunity grants), I do not think it would take all that long to figure when the top execs of AIG and other investment banking firms knew that they were making promises to the marketplace that they could not keep. The fraud starts there.

Yes, the SEC jurisdictionally likes to investigate only violations of the 1933 and 1934 Acts, but here the SEC could turn over its findings to the appropriate state Attorney General or US Attorney. Common law fraud, the promising of "insurance" for these derivative transactions when you know that you cannot keep the promise is still a lie and prosecutable.  Maybe this process has already started (kudos to NY AG Cuomo), but I would not hold my breathe.

While I have strongly supported Barack Obama's candidacy, I don't see the signs of the poiitical will to turn over the rocks. Until we do that, we won't be able to strengthen the financial regulatory system as we should.    

We need to restore faith in our financial system by making the commitment to clean it up rather than doing rah rah PR.