I’ve said it before but it bears repeating: The multi-million dollar frauds uncovered in the past few years could never have occurred without at least tacit support of major Wall Street firms. Sometimes their support is a function of negligence, other times Wall Street is an active aider and abettor.

We received yet another example of this Monday in the form of a settlement agreement between several Wall Street firms and a bankruptcy trustee looking after the interests of investors - many of whom are elderly retirees - who purchased paper issued by American Business Financial Services, (ABFS) Inc., a subprime lender that went bankrupt in 2005. Wall Street firms including J.P. Morgan Chase (JPM), Morgan Stanley (MS), Bear Stearns and Credit Suisse (CS) will collectively pay the trustee $100 million without admitting guilt after it was alleged that they propped up the lender in order to charge the company fees.

One of the givens of Las Vegas is that the odds are always stacked in favor of the house. But to the credit of Nevada’s gaming commission, aggressive measures are taken to ensure that only individuals with squeaky clean records are allowed to operate casinos. Just associating with someone of questionable repute can lead to a revocation of a casino license.

The arrest Thursday morning of 14 more individuals accused of insider trading serves as yet another reminder as to why Wall Street must be regulated with the same aggressiveness and diligence as state-licensed casinos. With more than three decades of experience representing individual investors who were deceived or cheated by Wall Street firms I can say with considerable authority that unmitigated greed and dishonesty is rampant in the securities industry. While Federal prosecutors are to be commended for collaring nearly 24 alleged cheaters connected with Galleon Group for trading on inside information, they simply don’t have the resources to root out the legions of crooks that permeate the stock markets.

One of the reasons hedge funds have commanded their stratospheric fees is the widely held belief that the people overseeing them are decidedly more brilliant than run-of-the mill institutional or individual investors. But it has become increasingly clear in recent years that many of the supposedly legendary investor titans aren’t quite as smart as they purported to be. Turns out, many have figured out a way to rig the system and see everyone else’s proverbial cards before playing their own.

To a layman, this is known as cheating. On Wall Street, it’s called insider trading.

This week Congress is holding hearings on various new proposals to reform the credit rating agencies. In their sights are Moody’s (MCO), Standard & Poor’s (MHP) and Fitch Ratings, Inc. which all played a large role in the housing bubble by assigning AAA ratings - their highest marks - to securities that included subprime loans. The ratings were paid for by Wall Street and allowed traders to buy and sell these securities as well as value them at highly inflated prices, thus earning huge cash bonuses. In actuality, banks were taking incredible amounts of risk and inevitably were forced to write down losses, eventually causing banks to fail and federal bailouts to ensue.

Several whistleblowers testified and told Congress that behind the closed doors at the ratings agencies, analysts thought either the sub-prime laden securities were worthless or too complex to assign ratings, but were told to assign AAA ratings nonetheless in order to keep Wall Street’s money pouring in.

Three loud cheers for Judge Jed Rakoff, the judge that Tuesday rejected the $33 million settlement between the SEC and Bank of America (BAC), insisting that BoA “materially lied” to shareholders.

As Rakoff put it, the settlement

Although SEC Inspector General David Kotz’s exhaustive 450-page report on why the SEC failed to uncover Bernie Madoff’s Ponzi scheme has not yet been released, the executive summary makes abundantly clear that the agency bungled numerous investigations and failed to heed numerous warnings about Madoff’s dubious activities.

The summary also contains a nugget that, if true, is frightening beyond belief. Madoff apparently confided to an investigator that he was on the short list of replacements for SEC Chairman William Donaldson. Weeks before the appointment was publicly announced, Madoff also told the investigator that Christopher Cox would get the job .

Although I’m not typically one for conspiracy theories, I must count myself among the growing legion who believe that Goldman Sachs (GS) has garnered such an inordinate amount of influence and power that the government and regulators now serve at the firm’s will, rather than the other, rightful way around. It’s become increasingly difficult to give credence to CEO Lloyd Blankfein’s arguments that Goldman wouldn’t have failed if Washington had decided not to embrace his entreaties to bail out AIG. If the insurance giant hadn’t been rescued, the cascading effect would inevitably have led to the firm’s demise. There is good reason that Goldman is known as “Government Sachs.”

So I’m not holding my breath the regulators are going to aggressively investigate the Wall Street Journal’s page one allegations that Goldman’s research analysts routinely hold a weekly “trading huddle” to give “tips” to the firm’s traders and 50 most-favored clients, including SAC Capital Advisors and Citadel Investment Group. Some of these tips are reportedly at odds with the published recommendations of Goldman’s widely disseminated research reports.

Unfortunately, my position that Ponzi Schemes, such as those of Peter Dawson, Nicholas Cosmo, Andrew Bowdoin, and Bernard Madoff, have the implicit support of major financial institutions is holding true. According to reports this week, Stanford Financial investors are suing five major banks that handled customer deposits for Allen Stanford’s Antigua based, Stanford International Bank.

The suit alleges the Bank of Houston, HSBC Bank (HBC), Societe Generale (SCGLY.PK), Toronto Dominion Bank (TD), and Trustmark National Bank (TRMK) provided an “essential conduit” to Mr. Stanford’s alleged fraud. The suit specifically singles out HSBC and Toronto Dominion as handling a substantial amount of Stanford deposits.

A wholehearted three cheers for Jed S. Rakoff, the Southern District of New York judge who refuses to rubber stamp the SEC’s $33 million wrist slap on Bank of America for failing to disclose billions of dollars in bonuses paid by Merrill Lynch just prior to the merger of the two companies. Judge Rakoff rightfully wants some accountability: In addition to wanting to know who was ultimately responsible for failing to make the disclosure, he also wants an explanation as to how the SEC determined that $33 million was a suitable fine.

Bank of America’s (BAC) defense in this matter is shameful. The bank claims that the firm’s white shoe lawyers made the decision not to disclose the bonuses and the SEC says it can’t dispute this claim unless Bank of America executives agree to waive their attorney-client privilege, which they aren’t prepared to do. Adhering to the SEC’s longstanding policy of treating executives at major financial firms with kid gloves, the agency opted to give Bank of America’s executives a pass. So much for the SEC’s pledge that the agency’s era of “See No Evil, Hear No Evil” is over.

Charles Schwab (SCHW), the San Francisco-based brokerage pioneer, has done a lot for individual investors. Chuck, as he apparently prefers to be called, revolutionized Wall Street nearly 40 years ago when he introduced discount brokerage trading and dramatically undercut the exploitive trading costs charged by the major brokerage houses. Discount brokerage was a major breakthrough for individual investors, and Schwab’s innovation decidedly ranks as one of the watershed moments in Wall Street history.

Schwab now wants to make U.S. bankers quake in their pinstripes. His eponymous firm is offering customers a no-fee credit card that rebates two percent of all purchases, which seems like a pretty sweetheart of a deal. Even better, the firm claims it will reimburse its customers the obscene service charges banks now levy for making withdrawals at someone else’s ATM. If these products prove successful, the banking industry might have to dramatically reduce its high fees to remain competitive, just as the big Wall Street firms did.

Last week, when pressured by federal Judge Jed Rakoff to explain why neither Bank of America CEO Ken Lewis nor Merrill Lynch CEO John Thain was held accountable or even named as a defendant, an SEC lawyer responded that the two top executives “relied on the lawyers’ advice and didn’t know what was in the disclosure schedule.”

The exchange between Judge Rakoff and the SEC attorney brings to light a very important question. If we except the simple fact that Wall Street CEO’s are paid massive salaries to make tough decisions for their company, why are they allowed to skirt responsibility when those decisions are found to be wrong, or in this case potentially illegal, regardless of who advised them to make the decision? As President Truman famously said, “The buck stops here”.

Now we’re getting somewhere.

Over the past 20 years, corporate interests and Wall Street lobbyists have stripped away investor rights and cushioned themselves from being held responsible for fraud. Not surprisingly, these same interests led the economy down the path to destruction. Legislators have finally taken notice.

It’s an age-old trick: if one’s good, then two’s better. But when it comes to leveraged exchange traded funds or leveraged ETFs and inverse exchange traded funds…that isn’t necessarily the case.

Over the weekend the Wall Street Journal reported that Massachusetts Secretary of the Commonwealth William Galvin sent subpoenas to several top financial firms including Ameriprise (AMP), UBS (UBS), LPL Financial and Edward Jones.

The New York Times’ Diana Henriques wrote an excellent account of Fiserv’s (FISV) potential liability for investor losses in several unrelated Ponzi schemes. As you may recall, Zamansky & Associates filed a class action lawsuit in federal court in Colorado on behalf of Madoff investors who were instructed to use Fiserv as their custodian for their IRA accounts.

The article clearly shows that Ponzi schemes almost always have large financial institutions supporting them in one way or another. In this case, Fiserv, one of the largest IRA service providers in the country, may be held accountable for $1 billion in investment losses.

In my last post I was downright jubilant that Wall Street endorsed the fiduciary standard for brokers. And don’t get me wrong, this is a major development. But, as they say, one step forward…two steps back. To wit, I read with great dismay two recent cases where the SEC enforcement division levied fines equivalent to a love tap for what appears to be serious wrongdoing.

In what I’m sure was a delight to Morgan Stanley’s PR office, the first case was buried in the Wall Street Journal in a five paragraph blurb on page C4. So allow me to give you some background.

An utterly improbable thing occurred last week when Wall Street endorsed the fiduciary standard for brokers. This is certainly a sea change for investors. A fiduciary standard similar to that which governs so-called “financial advisors” is something I’ve advocated for years. The new standard forces brokers to put customer interests ahead of their own, which seems logical enough even though up until now Wall Street fought against the issue tooth and nail.

But last week SIFMA, Wall Street’s lobbying group, got behind the idea which almost assuredly means Congress will turn it into a law. It’s long overdue and Congress should quickly pass legislation, lest Wall Street get cold feet.

For those who are intimidated by the complexity of the esoteric $59 trillion credit default swaps market (CDS), let me explain in raw layman’s terms the likely nature and significance of the Department of Justice’s antitrust inquiry into Markit, a company owned by more than a dozen Wall powerhouses including Goldman Sachs (GS) and JP Morgan (JPM): The DOJ wants to know whether Markit’s owners manipulated the company’s pricing data and index formulation to enrich themselves and screw their customers.

If the Obama Administration has the conviction and political temerity to investigate and prosecute the wrongdoing the DOJ suspects, it could forever change the “heads I win, tales you lose,” way the big Wall Street firms do business and could result in billions of dollars in fines and restitution, not to mention possible jail sentences.

Joe Nocera’s column in last Saturday’s New York Times about the victims of the Madoff fraud has been weighing on my mind. Nocera passionately defends Irving Picard, the trustee of the Madoff bankruptcy, for refusing to accept the Madoff statements at face value and seeking to claw back any monies that were in excess of what investors put in. The Securities Investor Protection Corp. will only reimburse Madoff investors for up to $500,000, regardless if the money they invested is well in excess of what they took out.

Nocera posits that Picard “almost certainly is not” misreading the law, but in focusing on the legal issue, he can’t see the forest from the trees. Nocera would serve his readers considerably better by asking this question: “Why is SIPC coverage a mere $500,000?”

Most major media outlets reported Thursday that Ross Mandell and several of his colleagues were arrested for a $140 million investment fraud scheme. Mr. Mandell is the founder of Sky Capital and its former CEO. The government alleges that Sky Capital was nothing more than a boiler room.

Mr. Mandell and his background on Wall Street is a case study for why there has to be regulatory reform. What most media outlets didn’t report is that Mr. Mandell is historically one of the most penalized brokers in history. He was the subject of a 5,649-word story in the Wall Street Journal which disclosed that as of March of 1996 (which is when the story was published) customers had filed 14 known complaints and he had switched jobs at least 13 times during a twelve year career, having been terminated four times for “alleged misconduct.”

As I write this post, a collection of highly educated, enterprising professionals (whose skills would no doubt be better suited for more constructive endeavors) are on a conference call scheming ways to blunt what Wall Street considers a “populist overreaction” to the banking crisis. Indeed, as reported by Bloomberg a few weeks ago in memos detailing confidential meetings at the Securities Industry and Financial Markets Association (SIFMA), Wall Street has launched an image improvement program led by former aids to Hank Paulson who meets every morning.

The reason being is that Wall Street fears that it won’t have a seat at the table when it comes time to hash out the details of President Obama’s regulation reform without a facelift. What better way to do it than spend nearly $100,000 per month on consultants after receiving $700 billion in TARP loans?