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DAVE DAVIES, Host:

This is FRESH AIR. I'm Dave Davies, filling in for Terry Gross, who has the week off.

When the energy giant Enron collapsed 10 years ago, top executives of the company faced criminal prosecution, and many served lengthy prison terms. In the savings and loan scandal of the 1980s, hundreds of bankers went to jail.

But the financial meltdown of 2008 has yielded a very different outcome. In April, Louise Story co-wrote an article in the New York Times, which began: It is a question asked repeatedly across America: Why in the aftermath of a financial mess that generated hundreds of billions in losses have no high- profile participants in the disaster been prosecuted? Answering such a question, the equivalent of determining why a dog did not bark, is anything but simple.

We've invited Louise Story here today to try and answer that question - why the dog didn't back. Louise Story joined the New York Times in 2006. She covers Wall Street and finance and was a finalist for the 2009 Pulitzer Prize in Public Service.

Well, Louise Story, welcome to FRESH AIR. You know, in the S&L crisis, the savings and loan crisis of the 1980s, hundreds of bankers went to jail. More recently, executives from Enron were prosecuted criminally.

In this horrific financial collapse, have there been criminal prosecutions?

LOUISE STORY: There really have been very few criminal prosecutions, and there has been no criminal prosecution of a senior executive from a major bank or financial company related to the financial crisis.

DAVIES: And what kind of other regulatory actions have occurred?

STORY: Well, you know, the Securities and Exchange Commission has brought some civil cases, though very few of them have named individuals who worked at the companies.

One case that did name an individual centered on Angelo Mozilo. You know, he was the chief executive of Countrywide, that giant mortgage company, and that case contains these emails where he was writing to other executives that he knew the mortgages that Countrywide was issuing were very toxic.

But he wasn't telling Countrywide investors in that, and he wasn't telling investors who were buying Countrywide's mortgage bonds. At the same time, he also was selling some of his own stock in Countrywide.

It's those sorts of accusations that have led some people to think there might have been a criminal case against Angelo Mozilo. However, it's been reported the Department of Justice is not pursuing one against Mozilo.

DAVIES: All right, I want to get to why there weren't more prosecutions, but let me just ask first, You know, some of these civil cases have resulted in settlements in the hundreds of millions, and some might look and say, well, that's a pretty painful punishment to inflict on these companies. What's your sense? How much of a corrective action are these civil suits, in which, you know, they get a whole lot of money?

STORY: Well, so for instance, the settlement with Goldman Sachs that the SEC entered into last summer was a pretty large one, $550 million, and you're right, some people would say that's a big punishment, $550 million.

But then, you know, other people would say: But Goldman Sachs makes that in about three weeks of trading. And remember these penalties are paid for by Goldman Sachs, ultimately by Goldman shareholders, not by the executives or the traders or the salespeople that actually individually played a role in what happened.

DAVIES: Right, and Lloyd Blankfein, who was the head of Goldman, who has been there since 2006, remains at the helm, right?

STORY: They're there, and they're also getting very large bonuses.

DAVIES: When there are these settlements, who gets the money?

STORY: So the settlements are set up differently. Sometimes, the money goes to the Securities and Exchange Commission. Often, the money goes to whoever was the victim of the crime in a sort of restitution. Sometimes it even goes to the shareholders of the company that committed the crime.

DAVIES: Now, let's take one case. You recently wrote about a suit brought by the U.S. Attorney's Office in New York against Deutsche Bank. What are they accused of?

STORY: Well, so that was an interesting case, and it's still ongoing, but it's a case that involves the FHA Fund, which is a government fund that backs mortgages, kind of like Fannie and Freddie do. And what they found is that a unit the Deutsche Bank had acquired had been committing mortgage fraud, had been lying about the quality of these loans.

So that's certainly a case that you could say: Yeah, that may be something that's related to the financial crisis, lying about the quality of these loans that the government is backing and ultimately the taxpayer will have to pay for losses on. But again, there was no person named in this case. They only named Deutsche Bank, and they did not single out any of the individuals who took these actions.

And when you read the case, you read about all these different people making these lies. They're not named. And you wonder, well, why aren't they held accountable? That's a question we've been getting a lot.

DAVIES: Right, and when I look at this case, I noticed that it was brought by the U.S. Attorney's Office of New York, which is of course a prosecuting authority. They can bring criminal cases, and they can bring civil cases, and in this case, they chose to make it a civil matter.

And you quoted the U.S. attorney in your story as saying, I believe, there simply was not enough evidence for a criminal charge.

And when I looked at it, it's - the allegation is that these folks lied to federal authorities and made a fortune from it. Why is that not a crime?

STORY: So at the press conference for this case, a number of reporters really pressed the U.S. attorney on it, and they said but there's a lie, and someone made this lie. Why aren't they named? And why isn't this criminal? And he said every lie is not a crime.

And so what he was referring to are the complexities of our laws by which, you know, you have to follow certain different provisions for it to be considered a crime, and in his judgment, these lies were not crimes, and so it was a civil case, which has far lower penalties than a criminal case would have.

DAVIES: So is it a matter of criminal intent, you have to know what the law is and intentionally, willfully violate it?

STORY: That's often a big part of it, but there's also a lot of other complexity in securities law.

DAVIES: Okay, let's talk about a piece, a fascinating piece that you and Gretchen Morgenson recently wrote about some of the conscious decisions made by government officials, some as far as back as 2008, when this was just unfolding, when the financial crisis was, you know, just emerging, decisions that really shaped the government's response or lack of response.

You wrote that in the summer of 2008, that the Justice Department adopted some new guidelines which essentially amounted to a softer approach to corporate crimes. What was this approach?

STORY: So there are these things called deferred prosecution agreements. And what they are is basically the government says to a company: Okay, we won't prosecute you, we won't indict you if you promise not to do this thing that you did, if you promise not to do it again.

It's a gentleman's agreement, and it really allows companies to keep their share prices higher, and it helps companies continue to do business with the government, but it's a lot lighter. And the government had been using those on and off since the 1990s, but it was never an official option.

And right in 2008, the Department of Justice issued a memo where they said that was an official option that prosecutors across the entire country were welcome to use with companies. This was celebrated on Wall Street. We actually found a memo that Sullivan & Cromwell, a law firm that represents companies like Goldman Sachs, some of the biggest banks, they sent a memo to their clients, and they noted this is very important.

And they said it showed that the aggressive days at the Department of Justice were coming to an end or at least decreasing. And so this decision was really good news for the banks. And it was interesting that it occurred at the end of the summer of 2008, right when all of these financial crisis cases that might have been made were becoming apparent.

DAVIES: Now what did government officials see as the advantages of a deferred prosecution as opposed to a plain old hard-nosed investigation that ends in handcuffs?

STORY: So there are a few arguments for it. You know, one, is that you can have really rough consequences for a company if you indict a company. Remember when Arthur Andersen was indicted back in the earlier part of this century, it essentially put that accounting firm out of business, and tens of thousands of people lost their jobs, and most of those people, of course, had nothing to do with any role that Arthur Andersen played in Enron's accounting. That's what that case settled on was Arthur Andersen's role with Enron.

And so a lot of people say you shouldn't indict a company because it can drive down the stock price, it could put it out of business, it can make people lose their jobs.

Another argument for deferred prosecutions is the government often enters into agreements with companies when they cooperate with the government and when they help the government find out what happened.

But this is a practice that is becoming very common and is becoming criticized by some people who are long-time lawyers who used to be prosecutors. Those former prosecutors told us that relying on these companies for cooperation is not smart because you're essentially outsourcing the investigation to the very company that is under suspicion.

So when the government gets cooperation with the company, they go to the company, and they say: We're concerned about X, Y, Z. Can you hire a law firm and check it out and tell us what happened and tell us if you think there was a crime committed?

And sometimes the companies come back, and they say yes there was, or they identify one worker who was involved, but if there was a crime that is not so clear, if it's a crime that relies on novel legal theory, or if it's systemic to the company, but what we've been told by former prosecutors is that these companies are very unlikely to come back and tell the government that a crime occurred.

And a lot of the financial crisis cases are probably in that grayer area, where you don't want to rely on companies investigating themselves.

DAVIES: One of the fascinating side effects of that practice, of course, is that it generates tens of millions of dollars for law firms that get the business of investigating these companies.

STORY: Yeah, lawyers now say they're practically the compliance bar because they're doing so much work doing these investigations for companies.

DAVIES: As best you can tell, what's behind - what was behind this change in 2008?

STORY: I don't know. I talked to a number of lawyers and former prosecutors who were there around the time, and it seems like it was just an evolution of a practice they were already doing. But I haven't found out about any key meeting where they decided to make it official.

We did find out about a different meeting that was very key to the evolution of the Department of Justice, but it happened in 2005. And at that meeting, the deputy attorney general, James Comey opened up the meeting with all the different top officials from the DOJ and said we need to consider whether we're being responsible enough.

DOJ: Just make sure you're being responsible.

And I talked with two people who were at that meeting who told me it was really a retrenchment away from the aggressive days at the Department of Justice towards becoming more business-friendly.

DAVIES: So there are cases where the Justice Department suspects wrongdoing, talks to a company, the company investigates, and then the matter is sometimes closed, and there is simply no public record of it.

STORY: That's right. In fact, one current assistant U.S. attorney told me he was amazed at how persuasive the companies are. He said he would read about something in the media, or he would hear about something from interviewing a witness in another case that he thought was surefire going to be a great case.

And they'd call the company in and tell the company to make a presentation, and he said they were really persuasive, and so then they dropped the matter.

The problem is what I understand from a number of lawyers who represent these banks is that because the current lawyers at the DOJ don't do as much of their own investigations, that also means that they don't know the right questions to ask, and perhaps they're a little too easily persuaded.

DAVIES: Right. I mean, the stuff that happens on Wall Street is enormously complicated and intricate, and I'm sure it's legally complicated, and if you're not involved and invested in the investigation, you're kind of outgunned when you come up against these firms, aren't you?

STORY: Right, and you know, the other problem the Department of Justice has been facing is that the part of government that can really help them bring cases are regulators, regulators like the Federal Reserve and the FDIC and the Office of the Comptroller. Those are the part of the government that are inside these banks.

And another thing that we've found through extensive interviews is that, and looking at data is that these regulators are no longer bringing a lot of cases to the DOJ.

So back in the savings and loan cases, the number of referrals, back in the '80s and the early '90s from the bank regulators, was off the charts, thousands a year of referrals of wrongdoing for the Department of Justice and the FBI to look into.

This time around, bank regulators have not been digging up wrongdoing on a large scale and bringing it to the Department of Justice.

DAVIES: Why are your number of referrals down so much? I mean, it seems like you might have plenty of things that the DOJ should at least check out in the last few years.

And he said: Well, you know, since the '90s, we've had this great system where the banks are supposed to refer wrongdoing themselves. And so regulators don't need to refer as much over.

DAVIES: I want to get into that some more, but let's take a little break here. We're speaking with Louise Story. She is a business reporter for the New York Times who has covered the financial crisis and Wall Street. We'll talk more after a break. This is FRESH AIR.

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DAVIES: If you're just joining us, our guest is Louise Story. She's a business and financial reporter for the New York Times. She's covered the financial crisis on Wall Street and some of the efforts to regulate the industry.

You know, we've been talking about the Justice Department and how there was a trend over the last several years towards softer enforcement of corporate wrongdoing, and you said that the regulators are a big part of the issue here. Let's take the Securities and Exchange Commission. I mean, they're the ones who have been - have done a lot of the enforcement actions that have occurred in the result of - in the wake of the financial collapse. How has the SEC changed in recent years?

STORY: Well, the SEC is under a new administration that has tried to reform it. Remember, they were very embarrassed by missing the Bernie Madoff Ponzi scheme. They completely missed that, even though they had a whistleblower bringing it to them years ago.

So they have a new leader, and they've hired a lot more lawyers, and they're trying to specialize in financial areas, but the thing that is pretty amazing is that of the financial crisis cases they have brought - and there haven't been very many with major financial players - but of the ones they've brought, they have been shying away from naming individual people.

DAVIES: Well, where are the cases? A lot of people think that there are things that might be cases. Or was there no fraud? Or where are the cases?

STORY: And I learned about a couple key decisions back in 2008 that really set the tone at the SEC. One, is we found that in the summer of 2008, when the SEC was negotiating big settlements with the banks related to auction rate securities, which is a short-term type of security, they were going to make the banks reimburse all kinds of customers to the tune of many billions of dollars, you know, 20 billions of dollars for just one bank, for instance.

And the Federal Reserve called them up that summer and told them to back off and to make the penalty lower, to make them actually only pay back retail customers. And so what that did was it helped the banks because the banks had a liquidity problem, and you can see why the Fed was concerned about draining them of funds.

SEC: Oh, we're not supposed to be too aggressive. And then just a few months later, after there was the federal bank bailout, the SEC actually developed a policy that it kept secret until we wrote about it this year. They developed this secret policy where if you were a bank that got bailout money, the SEC would not impose too heavy of a fine on you, even if there was wrongdoing.

So again, setting the tone, and what I heard from these lawyers was in '08 and '09, the crucial time to get these financial cases going, that really caused a malaise there and a slowdown because the lawyers just didn't see a golden finish line if they found something really important because of this pullback approach.

DAVIES: So you have the Federal Reserve system, Federal Reserve Bank, contacting this regulator and suggesting that they back off on harsh penalties. Now, if someone in the government were to call a federal prosecutor or the U.S. attorney and say, I've got a little suggestion about this criminal case you've got going, that would be front-page news. I mean it might even be criminal. Is it improper for the Fed to tell the SEC how to undertake an enforcement action?

STORY: You know, regulators were in a very tough position in 2008 because they actually had multiple missions. So bank regulators are supposed to focus on the safety and soundness of the markets, and we were in a crisis.

And so that was a legitimate part of their role, is to focus on the safety and soundness of the banks, okay? But they also are supposed to do enforcement. And part of how you keep a market sound is by - if there's someone who committed wrongdoing, you hold them accountable.

And so, those goals came into conflict in 2008 and 2009. These regulators were divided. And not only did the Federal Reserve push to have the banks pay - it wasn't really a penalty, but they pushed to have them reimburse fewer customers so that billions of dollars would be saved for the banks.

Also, we found out about a meeting where Timothy Geithner - who, you know, is now the Treasury Secretary - but back then was at the Fed, he was the president of the New York Federal Reserve. And in October 2008, he met with the attorney general of New York, Andrew Cuomo, and he expressed to him how nervous he was about the markets.

And what I heard from a couple people who had heard about this meeting was it made a big impression on the attorney general that it wasn't a good time to throw a bunch of subpoenas around and that it was a really fragile time in the markets.

And so that would be an instance where you would see, you know, Geithner did not sit there and say, oh, you cannot bring cases. But he expressed a strong concern for the markets that really gives a slow down message.

DAVIES: Louise Story covers Wall Street and finance for the New York Times. She'll be back in the second half of the show. I'm Dave Davies, and this is FRESH AIR.

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DAVIES: This is FRESH AIR. I'm Dave Davies in for Terry Gross. We're speaking with journalist Louise Story about why no major players in the 2008 financial meltdown have faced prosecution. Story's pieces have pointed to decisions by prosecutors and regulators to take a softer approach to corporate wrongdoing, often relying on financial companies to investigate themselves. Louise Story covers Wall Street and finance for The New York Times.

So many things that, you know, that Wall Street does are so complicated and the law is so complicated. Does the SEC have the staff, the brainpower it needs to be an aggressive regulator if it wants to?

STORY: Well, that is a huge problem. It's something you've seen a lot of people in Washington talking about in the last few months. Mary Schapiro, the head of the SEC, and also the head of the Commodity Futures Trading Commission, Gary Gensler, they've both testified that they need more funding and they're not getting it. In fact, there a lot of people in Washington who are trying to squeeze their budgets down, saying they need to work more efficiently, so there is a real concern that all of the new regulations that have been passed, related to the financial crisis, will be very difficult to enforce. And any wrongdoing that needs to be examined will also be difficult to look at because these agencies are so stretched for staffing.

DAVIES: And is it clear why Congress isn't authorizing a bigger budget for the SEC? I mean you would think that given what's happened there would be enormous public interest and effective financial regulation.

STORY: Well, part of what's going on is that the financial reform bill that was passed a year ago, the Dodd-Frank bill, remains very controversial. You have a lot of lawmakers, mostly Republican, who believe that a lot of the parts of it are horrible and should be undone. They have held press conferences and said they'd like to rewrite a lot of that law. And so one of the reasons they are trying to starve these agencies for funding is because that way some of these new parts of the law that were past may not come into being. So it's a tactic at kind of reopening the floodgate on a law that was already past that remains controversial.

You have a lot of people on Wall Street who say parts of this law will make it very hard for them to do business, and therefore will hurt the economy. Because, of course, you know, the banks are pipelines of the entire economy. They are the entities that spread credit throughout to lend money to people, and so if they're not handled appropriately there can be consequences. It's really hard so as a server to know how much the banks are dragging their feet because they just want higher profits and they want to pay higher bonuses and how many of their concerns are really legitimate and really may hurt the economy if these parts of the law go into effect.

DAVIES: I'd assume they have lobbyists who are very active on Capitol Hill on this.

STORY: Oh, they absolutely do. They've been aggressively meeting with them. You can look at any of rosters of meetings that the Treasury Department of the SEC and you see every single bank, J.P. Morgan, Goldman Sachs, Citigroup in the there, you know, weekly meeting with them on these issues. The other thing that you have really lingering with this is you have kind of two meta-narratives on the financial crisis and no narrative as one out. So, one narrative is that gee, this was all a big mistake. No one saw this coming. It was a confluence of events. No one could've predicted. Hundred year storm and yes, there were a lot of really dumb choices. But they were not criminal. They were not fraudulent. There was no bad intent. That's one narrative. And then you have this other narrative - that there was a lot of greed. There was a lot of misleading marketing sales of these mortgage bonds. There were a lot of intentional acts, where people knew these mortgages were bad but they issued them anyways.

And, you know, really in our political debate and within Wall Street and in society we are still debating. And people come down on one side or the other. And so for the people who believe that this was just a lot of stupidity, they don't think that there should be many cases and they don't think that the government should put a lot of resources into the enforcement units at the SEC or the DOJ to look at this. They think the DOJ should keep its resources on terrorism cases and not go look for cases related to what was actually stupidity. And so that's also what you're seeing in this funding of these entities.

DAVIES: Well, you know, regulators do what they do and the Justice Department does what it does. Congress has also been busy. I mean there was a big Senate investigation into the crisis and then the Financial Crisis Inquiry Commission also produced reports, all of that revealing some really troubling activity. What's been the impact of those investigations on regulators and enforcement?

STORY: Well, the biggest impact of all these reports, really, has been spurring forward this public question about where are the prosecutions - why aren't there more cases related to the financial crisis? Because you have seen lots of people out there, reading these reports. And I'll tell you one of the most common questions I get in my reader inbox - and same goes for my colleague, Gretchen Morgenson, who I'm doing a lot of this reporting with - is notes from readers who say gee, I was reading this Senate report about Goldman Sachs and Deutsche Bank and Washington Mutual and there seem like there were a lot of fishy things there. And, in fact, the Senate report even says that some of those things were acts of fraud. So where are the cases?

And one of the things that legal experts have told us is that these reports are helpful, they provide a roadmap for prosecutors to follow, they lay out witnesses that the prosecutor should speak with. But they're not evidence, often, that can be used in court. Even if it's under oath, whatever is told to one of the Senate reports or any of these other reports, is considered hearsay in court. And so we've got these very interesting reports, but there's still a lot of work the DOJ and the SEC would need to do to take those and bring them to cases they could bring in court.

DAVIES: You know, prosecutors do like attention. I mean more than one governor or senator got their start with big cases they brought as federal prosecutors. I mean I wouldn't think that they would have cold feet. You would think that these folks if they have a chance to, you know, to put some cuffs on some Wall Street barons and that they would do it.

STORY: There is that. You're right. There've been a lot of prominent politicians that have come from prosecutorial background. But when they've been told to back off by high people in government, like we discussed earlier in the program, you know, a conversation that Tim Geithner had with the attorney general of New York, that sends a real message. The other thing that has become more and more common at the DOJ is the revolving door. You know, you've always seen on Capitol Hill staffers who go in and out working for senators and then working from lobbyists and working for companies. You're seeing it a lot at the DOJ. It was a time from '02 until really '08, it was a time that financial law businesses booming and there were a lot of law firms that were higher any prosecutor who had financial expertise. And a lot of those prosecutors have already gone back to government or cycled back out. And so, the ties between the defense community and the DOJ have gotten particularly strong when it comes to financial sorts of cases.

DAVIES: You've written that the FBI was, I believe, in 2008, about to get more active and assign more resources to look into mortgage securities fraud. What happened?

STORY: Well, you know, the FBI was pretty early in identifying the mortgage fraud problem. There was someone there in charge of their criminal division, Chris Swecker, who went on to TV as far back in 2005 and said mortgage fraud is a major problem. And by 2008, their criminal division did a big study has identified about two dozen parts of the country where they wanted to shift resources to look at mortgage and financial fraud. And I talked with the head of the criminal division from that period Ken Kaiser. He told me that they were going to look not only at mortgage fraud among consumers, but also at the role of the major financial companies, all the way out the mortgage pipeline. And they sent out a memo to reallocate resources. After they sent out the memo to all of their field offices, there was a call that came in from the Department of Justice telling them to rescind the memo. And - so they did, and what they did was they told the field offices okay, you could ignore the memo. You don't need to shift the resources to financial cases if you have other things you need to use that money for.

DAVIES: Wow. Any idea where that came from?

STORY: The furthest I got, you know, Ken Kaiser was quoted in our article about this, and he said that he was the head of the criminal division at the FBI and he said he was told that the message came in from the Department of Justice, but he did not know who it came from there, and the Department of Justice declined to comment to us on that particular situation.

DAVIES: We're speaking with Louise Story. She is a business and financial writer for The New York Times.

We'll talk more after a break.

This is FRESH AIR.

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DAVIES: If you're just joining us, our guest is Louise Story. She is a business and financial reporter for The New York Times. She covers Wall Street and has looked into the financial crisis, its origins and regulations that have followed.

Let's talk about one of these cases that's gotten a lot attention. This is the young guy at Goldman Sachs, Fabrice Tourre...

STORY: Yeah.

DAVIES: Has the nickname Fabulous Fab. Tell us what he is accused of.

STORY: Fabrice Tourre was a relatively junior salesman at Goldman Sachs in the unit that marketed what turned out to be some of the most toxic mortgage- securities they created. And when the case was brought against Goldman Sachs by the SEC last year, he was the only individual accused of wrongdoing. And he is accused of not telling investors who would buy these securities that they weren't designed in part by another investor, John Paulson. He's a prominent hedge fund manager, who was betting against these very same securities. So John Paulson was negative on housing and he wanted these securities to do poorly. He was betting against them. But yet he got to help design them. And the SEC says that Fabrice and Goldman Sachs should have told the investors who were positively betting on those securities that that other person who was negative on them had had an input on how they were created.

DAVIES: Now one of the things that's interesting about the Fabrice Tourre case is that you've written that a lot of folks believe there were plenty of people at Goldman who knew about and were involved in this activity but he just happened to be the one who had I guess that the most indiscreet females, right?

STORY: Absolutely. I mean as far back as 2009, when my colleague Gretchen Morgenson and I were writing about these Abacus securities, we were told by a lot of current and former Goldman people that there were a large team of people involved. And, in fact, since then many Goldman employees have told us they were so surprised that only Fabrice was named. Fabrice, of course, himself thinks it's a little odd he was the only one named. And we recently obtained the replies - the private reply that Fabrice sent to the SEC trying to convince them that he should not be the only one named. And in that Wells reply, he laid out all kinds of people, about six or seven other people who were just as involved in all of the activities as he was.

DAVIES: And one of the fascinating pieces of this story is that you got that via a discarded laptop. Is this right?

STORY: That's right. So Fabrice had thrown out his laptop in 2006 in a garbage area and it was found by someone who gave it to a friend and that friend eventually realized last year that she had Fabrice's old laptop because his name was in the media. And so she gave us a copy of some of the materials on the laptop and what we found to be newsworthy and interesting was this private reply that Fabrice and his lawyers had filed to the SEC trying to convince them that there were many other parties at Goldman who were equally involved in the deal at the center of that case.

DAVIES: We're speaking with Louise Story. She's the business and financial reporter for The New York Times.

You know, what's fair and what's legal aren't the same thing. And what's sleazy and what's legal aren't the same thing. And so when one finds practices that one doesn't like that doesn't necessarily mean you can make a criminal case. And one of the things that I wondered when I considered the fact that in the savings and loan crisis there were hundreds of bankers that were criminally charged and very, very few, certainly no senior executives this time, was whether laws have changed that protect those in the financial industry - that provide layers of deniability. Is that a factor here do you think?

STORY: I don't think that laws have changed in that manner. I think that laws have not kept up with the complexities of Wall Street. And what you've seen in the last couple decades is you've seen more and more large banks and investment banks that essentially ran large hedge funds within themselves. So they took all kinds of big trading positions for their own books, even while they were supposed to be serving clients and making trades for clients and lending out money to clients.

And that was an essential conflict of interest because sometimes they would want a trade to go well for themselves and the only way for it to happen was to do something that was not advantageous for a client. It's really a change from the Wall Street of several decades ago when the banks were primarily focused on serving their clients.

DAVIES: There was a piece about Sheila Bair, the outgoing head of the Federal Deposit Insurance Corporation, over the weekend and she was sort of, you know, a gadfly in some of the regulatory discussions as the financial crisis unfolded. And one of the things she said was one of the problems that she found with the way the government was respondent, I believe she said that it acted as if no one were at fault. Are there problems with that approach going forward?

STORY: Well, that gets to this crucial debate about what caused our financial crisis. There are many people out there on Wall Street and also within the regulators who believe that this was all a big mistake and that people made stupid decisions. And there are other people who believe that the Wall Street traders and the executives knew these loans were horrible but they purposely carried forward anyways because they were driven by their profits.

And so, Sheila Bair's comments about holding no one accountable hints at the idea that there are some people who knew they were taking steps that were risky and harmful and that they haven't been held accountable.

You know, the FDIC where Sheila Bair is departing from, they have brought a case - it's a civil action - that names a couple executives from Washington Mutual, that giant bank in California that collapsed and is now owned by J.P. Morgan. And so, that is a case - it is civil, not criminal - but that is a case that may hold some executives accountable and it came from the FDIC.

The other thing to think about with Sheila Bair's comments is that Wall Street might have been held accountable through measures other than lawsuits and jail time and prosecutions. Wall Street could have been held accountable, for instance, with just a lot of new rules that really changed the way they operated.

For instance, reforms that broke these companies down into smaller firms or reforms that made it more difficult to pay such large bonuses when the trading actions might lead to future risk in the economy.

DAVIES: And that would've been up to Congress, I guess.

STORY: Well, Congress had a lot of power, particularly in the fall of 2008 when they bailed out the banks, they could have demanded practically anything in exchange for that money but they actually demanded almost nothing. And that was because Hank Paulson, who was the Treasury secretary at that time, was afraid the banks wouldn't take the money if there were strings attached. But in retrospect, a lot of financial experts say now it's clear the banks were so at risk.

Even Goldman Sachs was borrowing money from the Federal Reserve through a private, kind of secret transaction that only came out recently. And so these financial experts say it's very likely the banks would've taken money with whatever strings came attached. And that might have been a way to hold the industry accountable, would have been to really impose major changes back then when they were begging on the taxpayers' door.

DAVIES: Well, Louise Story, thanks so much for speaking with us.

STORY: Thank you.

DAVIES: Louise Story covers Wall Street and finance for The New York Times.

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