America Is a “Failed State” with a “Dual Justice System … One for Ordinary People and then One for People with Money and Enormous Wealth and Power” - Washington's Blog

And the chair of the Financial Crisis Commission, Phil Angelides, said today:

I think there’s a great concern in this country on two fronts. One is there’s a question here, do we have a dual justice system? One for ordinary people and then one for people with money and enormous wealth and power. Secondly, we need deterrents. To the extent laws were broken, we need deterrents. If someone robs a 7-11, they took $500 and they were able to settle the next day for $50 and no admission of wrongdoing, they’d knock over that 7-11 again. And we’ve seen time after time where people and firms have made tens, one hundreds, billions of dollars. They’ve settled charges for pennies on the dollar. At Citigroup for example they represented that they had $13 billion of subprime mortgage exposure when they really had $55 billion. The penalty to the chief financial officer who made $19 million that year, 2007, was $100,000. Goldman was fined $500 million but the date they settled their stock moved up $2 billion. There’s been no real consequence.

Roy penalties are administered by the O police, for example prison. O penalties work better when resources are scarce. In a boom resources can also become scarce, companies might commit fraud if the fines and loss of business because of their reputation is are less than the profits. 

Well I think there’s two things here. Number one is it’s up to the prosecutors to do thorough investigations. That’s what we should expect. We don’t want hangmen justice. We don’t want vengeance, but we want thorough investigations. And if people crossed a line they ought to be prosecuted. But there were a lot of people who bellied up to the line and conducted themselves in a way without the highest standards of ethics or moral conduct that hurt the economy badly.

And I think one of the things that’s most troubling to people is there seems to be very little relationship between who drove this crisis, the big financial institutions, the CEOs, regulators who didn’t do their job, and the people who are paying the price, which are millions of people who have lost their jobs, lost their homes, lost their life savings.

 While the Y-V companies can make the lion's share of profits much of the fraud was driven in Iv-B, dishonest subprime salesmen falsified loan documents that in many cases were already liar loans. The fraud escalated between these two and often the Y-V companies believed these loan documents were true, also Bi pension funds bought subprime bonds based on them.