Pigs fly! Barney Frank and I finally agree about something. Speaking about going after various fraudulent financiers Mr. Frank remarked, “Rules don’t work if people have no fear of them”

What a revelation. The reason everyone up and down the mortgage chain as well as on Wall Street took the liberties they did was that the risk/reward equation was heavily reward weighted. On the very remote chance that you were caught the punishment was a fine while the potential payoff was seven figures. 

Under pressure from an impatient Congress, the Justice Department along with the states’ attorneys general are ramping up to go after the players. The New York Times reports that though they aren’t saying much right now, there have been high level meetings at the Justice Department firming up plans on how to move forward.

“It’s clear that he and other top-level members of the Obama administration want to seize the opportunity to send a message of zero tolerance for mortgage fraud,” said Connecticut’s attorney general, Richard Blumenthal, who attended a meeting with Mr. Holder and a number of state attorneys general last week in Washington. “The only question is when and how they will do it.”

Back in the 90’s we discovered an old truth when many jurisdictions adopted the “three strikes rule”. That truth was that you people usually have to think that the consequences of not obeying the law will result in unacceptable consequences. Put people in jail and crime decreases. Duh. Fifteen years and a couple trillion dollars later we come to the same conclusion regarding white collar crime.

As a country we don’t seem to learn quickly but eventually we do figure it out.

Apparently, the Obama administration even recognizes that money is going to be necessary to really make an impression. Funds are being diverted from anti-terror activities — maybe not the best idea — to help move the project along. Frankly, given the trillions we plan to spend on other activities I don’t quite understand why a couple measly hundred million couldn’t be found to fund this thing properly. But right now, I’ll settle for the crumbs.

Here’s hoping that this is more than public relations. We’ll know when we start seeing the indictments and perp walks around the country. As bad as Bernie Madoff might have been, he pales in comparison to the collective damage inflicted by many others.