Just three days ago in “Wall Street To Enter Hollow Guilty Plea On FX Rigging, Return To Business As Usual,” we lamented the fact that the Justice Department’s latest attempt to convince an incredulous public that the government is willing to prosecute white collar crime at TBTF institutions (which includes an amusing ‘crack down’ on UBS which we outlined here) will ultimately end in nothing more than the payment of a token fine before it’s back to business as usual. We also noted that there are actually SEC regulations in place specifically designed to ensure that so-called “bad actors” are punished in a way that is actually meaningful to them and as such serves to deter the type of behavior that results in the buildup of systemic risk and the rigging, fixing and manipulation of every market and -BOR on the face of the earth. Specifically, we said the following:

Even after Wall Street firms essentially admit to committing egregious fraud by ponying up billions to settle allegations of manipulation, policies put in place to ensure that deep pockets don’t allow big banks to simply sweep scandals under the rug once settlements are doled out are systematically skirted. The latest example of this was Deutsche Bank, who, after paying $2.5 billion to settle allegations its traders conspired to manipulate all manner of -BORs, worked with the CFTC to have language inserted in the settlement agreement exempting the bank from a Dodd Frank rule that restricts so-called “bad actors” from taking advantage of exempt securities transactions.

The excuse for allowing Wall Street to skirt the very penalties that were put in place as a result of the very things for which the banks are now being prosecuted is two-fold: 1) there’s the so-called ‘Arthur Andersen effect’ whereby the decade-old collapse of an accounting firm and the layoffs that accompanied it are somehow supposed to represent what would happen if a Wall Street bank were not able to claim seasoned issuer status, and 2) curtailing a major bank’s ability to issue capital “speedily and efficiently”, participate in private placements, and manage mutual funds represents a systemic risk.