As we head into the 2012 presidential election cycle, the new, official Obama administration policy on Wall Street is crystalline: Hands off the bad guys.

Consider what Sheila Bair, the outgoing chairman of the Federal Deposit Insurance Corp., said at a Council on Foreign Relations event on June 9 about whether Wall Street bank executives should be held accountable for the criminal negligence that led to the worst financial crisis since the Great Depression.

“I think a lot people were looking the other way when they shouldn’t have,” Bair said. “Again, where it transcends to the place of just not doing your job and to actually knowing about it and aiding it, I think that’s clearly criminal behavior and people should go to jail.”

So far so good. But Bair immediately made clear that she wasn’t accusing any Wall Street big shots of doing anything wrong: “It’s not clear that higher up that was the case. But I think that’s what law enforcement should figure out.”

Unfortunately, law enforcement is getting nowhere on figuring it out. Preet Bharara, the U.S. attorney in the Southern District of New York, recently explained to George Packer of the New Yorker why he had not yet indicted any high-level bankers. “If the well is dry,” he said, “a thousand more people aren’t going to get you water in that well.”

An Offended Prosecutor

He then took offense to the criticism his office has received. “It bothers me a little bit when people suggest, without knowing anything, that we’re not even bothering to look,” he said. “Where there’s smoke, we take a look. Do you have any idea how much people want to bring the case if it exists? So what could be the reason we haven’t? Sometimes people say, ‘It’s because you’re beholden to these guys,’ which doesn’t make any sense. Do we look like we’re afraid to prosecute anyone?”

And yet the only prosecutions we see are tiny fish like Fabrice Tourre of Goldman Sachs Group Inc. and hedge-fund honcho Raj Rajaratnam, who was a slimy inside-trader but had nothing to do with causing the economic meltdown.

Well, if the justice system seems stymied, at least we can expect President Barack Obama, who in 2009 referred to Wall Streeters as “fat cat” bankers, to lead the charge. Indeed, last week he went into the lair of the Masters of the Universe and sent them the strongest possible message: He asked them to pony up $35,800 a head for his re-election campaign and to have dinner with him at Daniel, the French restaurant on Park Avenue.

How lovely. About 70 cats got fatter that night -- on lobster, roasted local beets, Kobe beef -- and the president raised $2.4 million for his coffers.

A Soft Settlement

Just in case the message that all is forgiven wasn’t clear enough, last week also saw a settlement of the Securities and Exchange Commission’s mortgage-backed securities case against JPMorgan Chase & Co. In exchange for a get-out-of-jail-free card, JPMorgan paid the SEC $154 million to settle claims that it -- like Goldman Sachs in the Abacus 2007-AC1 case -- had misled investors about the risks inherent in a collateralized debt obligation it was manufacturing and selling as the housing bubble was popping.

Just Move On

Why the SEC squeezed $550 million out of Goldman and JPMorgan got off with paying less than a third as much for virtually the same behavior is a legitimate mystery. What we do know is that we all get to move on, as Jamie Dimon, the JPMorgan chief executive officer, has long asked us to.

The continuing free passes are immensely frustrating, especially when the evidence continues to pile up that lots of people at these firms knew very well as 2007 progressed that they were packaging lousy mortgages and selling them at par to investors. For instance, the SEC’s complaint against JPMorgan included an e-mail sent on Feb. 13, 2007, by a “salesperson” in JPMorgan’s investment bank who was working with Magnetar Capital, the hedge fund looking to short Squared, the synthetic CDO in question. “We all know,” the salesperson wrote, that Magnetar “wants to print as many deals as possible before everything completely falls apart.”

A Pregnant Deal

As the market began to crack, JPMorgan pushed potential investors very hard to buy Squared. On March 19, one employee wrote to the European sales force that “we really need your help on this one. This is a top priority from the top of the bank all the way down.” Three days later, another member of the deal team tried again to get the sales team hyped. “We are soooo pregnant with this deal, we need a wheel-barrel to move around,” she wrote in an e-mail. “Let’s schedule the cesarian, please!”

Needless to say, similar e-mails have been found in the files of bankers and traders along Wall Street and at the credit rating services, such as Moody’s and Standard & Poor’s. Are we really expected to believe that such widespread questionable practices flourished without any of the corner-office folk knowing about it?

Make no mistake, Sheila Bair: those “higher up” on Wall Street knew very well what their firms were doing and simply chose to ignore it. After all, there was money to be made. (JPMorgan got paid $18.9 million to slap together Squared, and Goldman got paid $15 million for Abacus.) If that isn’t enough to make you lose your lunch -- although not, of course, a $35,800 dinner -- then the fact that Wall Street is going to get away with it all surely will.

(William D. Cohan is a Bloomberg View columnist. The opinions expressed are his own.)

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To contact the writer of this column: wdcohan@yahoo.com.

To contact the editor responsible for this column: Tobin Harshaw at tharshaw@bloomberg.net.