In the deregulated realm of US banking and finance, crime does occasionally pay for its foul deeds, not in prison time but by making modest rebates to the victims. On June 10 Citigroup, the largest and most flagrant of Wall Street offenders, agreed to provide $2 billion to the injured investors in Enron, the colossal corporate hoax whose ingenious balance-sheet deceptions were engineered by financiers at Citigroup and other leading banks. Another major culprit, JP Morgan Chase, settled a few days later for $2.2 billion. This sounds like a lot of money, but it’s trivial alongside the $40 billion or more that shareholders and pension funds lost in the Enron swindle. Citigroup had already paid even more–$2.65 billion–for its role in the WorldCom swindle. No contrition required; pay out some money, get on with business.

We might at least pause to marvel at what the modern bankerly imagination has created: a huge, all-service, guilt-free money machine. Criminal behavior is defined downward into a manageable cost of doing business. For its part in numerous reckless scandals, Citigroup has set aside (or already expended) an astonishing total of $9.8 billion. But since its quarterly earnings run around $5 billion, these costs are easily spread over years (and reduced by one-third after tax deductions). Some financial experts argue that this new beast of megabanking would become still more profitable if it decided to obey the laws. I’m not so sure. Citi’s criminal behavior is so far-flung and ambidextrous it seems to be part of the profit structure.

At the dawn of early capitalism five centuries ago, the merchant princes of the Roman Catholic Church were absolved of mortal sins–usually the sin of usury–by paying handsome indulgences to the church. American democracy appears to have re-created a similar system, reflected in Citigroup’s rap sheet. In addition to Enron and WorldCom, Citi was implicated in fraudulent collaborations with Global Crossing, Dynegy, Adelphia and a bunch of other corporations. Its high-flying stock touts–most infamously Jack Grubman of its Salomon Smith Barney subsidiary–took care of the corporate insiders by gulling the sheeplike investors and awarding lucrative IPO shares to favored customers and friends. The SEC investigation noted lawsuits alleging that Citi analysts’ research reports on companies were “without a reasonable basis in fact.” Citi paid $400 million for forgiveness, then paid additional apologies for allowing mutual funds and other institutions to harvest under-the-table profits.

Citigroup is a global model of these enterprising US methods. In China two Citigroup investment executives were suspended for providing false information to regulators. In Britain securities regulators investigated when Citi engineered a huge, $13.5 billion bond sale, then bought back the bonds at depressed prices (the bank apologized to Europeans burned in the transaction). In Argentina the US SEC went after Citi’s accounting irregularities. In Japan Citigroup was forced to close down its private banking operations in 2004–accompanied by humbled, bowing apologies–for allowing employees to engage in fraudulent transactions.

The ugliest dimension of Citi’s profitability (though trivial in scale compared with investment banking) involves “predatory lending” to poor people trying to buy homes. Its consumer finance division, CitiFinancial, and subsidiaries jacked up interest rates and gouged buyers with inflated up-front fees and unneeded insurance coverage, thus setting up unwitting borrowers for default and loss of their homes. Among enforcement actions was one by the Federal Trade Commission that resulted in Citi’s paying $215 million in restitution. Even the Federal Reserve was moved to fine Citi $70 million for violating federal fair-lending laws and attempting to mislead bank examiners. Undeterred by its notoriety, however, Citigroup keeps buying up low-end finance companies, promising to do better in the future. Sandy Weill, the now retired chief executive, confided to Citi employees: “I feel badly, and I truly regret the pain that has been caused.” He meant, it seems, the pain to Citi employees–not Citi’s victims.

Financial reform–to the extent there was a movement in that regard (it didn’t go very far)–is over, obviously, though the scandals continue. What’s left is this nagging question: Where was the public outrage? Why did the blizzard of scandals not generate an angry new politics to confront bloated institutions like Citigroup and cut down their reach and lawless arrogance? The answer involves partisan politics–but maybe not what you expect.

Citigroup is a monstrosity created in its current state wholly by the Democrats, not right-wing Republicans, just as the original financial deregulation enacted in 1980 was achieved by a Democratic President and Democratic Congress, not Reaganites. That legislation abolished interest-rate controls and decriminalized usury (for an example of legalized usury, check the interest charges on your credit card). The 1998 legislation that created all-purpose megabanks was achieved by Bill Clinton, but with advanced regulatory approval from Fed Chairman Alan Greenspan. Treasury Secretary Robert Rubin–author of Clinton’s finance-friendly economic policy–then returned to New York to chair Citi’s executive committee. When the Enron fiasco broke in 2001, it was Rubin who phoned a Treasury official to suggest the government come to Enron’s rescue. The Bush Administration wisely kept its distance.

Without a political party to voice a critique and rally demands for reform, the popular rage was smothered and diffused. People felt shame for losing their savings and deeper cynicism about Washington. The political club responded clubbily to the financial disaster. Faced with a crime spree on Wall Street, Democrats looked the other way. Rubin and Wall Street friends remain trusted advisers to party leaders, including presidential hopefuls like Hillary Clinton. More to the point, Rubin manages a major flow of Wall Street political money, financing not only candidates but much of the influential policy infrastructure now forming around the party. Grassroots Democrats who believe getting Republicans out of power will restore an equitable system need to understand this. After they defeat the right, they will then have to take on the Democratic Party’s own “Citigroup caucus.”