The financial scandals continue to produce more outrageous revelations, but lately they come with lurid personal details more appropriate to bottom-dwelling tabloids than the Wall Street Journal. The tangled plot and expressive names at Citigroup seem borrowed from Dickens. The megabank's well-known stock tout, Mr. Grubman, manipulates witless investors into buying the shares of American Telephone & Telegraph, not to accumulate more worldly wealth for himself or his firm but to get his 3-year-old twins into the prestigious preschool at the 92nd Street Y in Manhattan. Quite ridiculous, Grubman confided to a friend, "but there are no bounds for what you do for your children."

To secure the school's coveted acceptance of his adored children, Grubman enlists the aid of his powerful boss, Weill (some call him "Sandy Wile"), who generously agrees to give $1 million to the school (not his money but the bank's). In return, Grubman pumps up his valuation of AT&T stock to a "strong buy" so that Weill may ingratiate himself with Mr. Armstrong, AT&T chieftain and a Citigroup director. Armstrong is thus recruited for a boardroom plot to destroy Weill's rival for power at the bank ("nuke" him, in Grubman's coarse phrase). All goes as intended. Weill's rival is pushed out. Armstrong, grateful for the shilling of AT&T shares, assigns the bank a lucrative deal that will yield $45 million in fees. And Grubman's little twins are accepted by the 92nd Street Y.

The affair might have passed unnoticed and unknown--save for the killer e-mails. Grubman's boastful communications with friends and colleagues have been disclosed, thanks to a relentless public sleuth named Spitzer, New York's Attorney General. They spell out the wicked drama in which Grubman used Weill and Weill used Armstrong, while Armstrong used Grubman and Weill, all to good personal advantage. Grubman exalted in the triple play: "Once the coast was clear for both of us (ie Sandy clear victor and my kids confirmed) I went back to my normal self." That is, several months later he withdrew the "strong buy" recommendation, no harm done. The only losers, it seems, were those poor chumps, the investors who park their savings at Wall Street's leading financial institution and believe what it tells them.

What do we learn from this instructive tale? That it's not always only about the money. It's also about roaring egotism, the kind of imperial self-gratification the members of a privileged club operating on vast unaccountable power expect. In a twisted way, Grubman's messages were meant to defend his integrity-- he wasn't hyping stock values for personal gain, he was doing it as fatherly duty. For love, not for money. The self-portrait is probably sincere--how the players truly see themselves (and their drooling customers). Insider duplicity is the routine, milking the herd a daily chore. Why the fuss? Didn't you know this is how Wall Street works?

Recently we learned (thanks to thestreet.com) that Medal of Honor winner and former Senator Bob Kerrey, now president of the New School University in New York, cashed out $850,000 of his stock options in the Tenet Healthcare Corporation--just days before the company's scandal of unnecessary surgeries and inflated Medicare billing was revealed, and its share price collapsed. Kerrey is a Tenet director but says he didn't know a thing about these troubles. He was merely rebalancing his portfolio, at the behest of his financial adviser. Reporter Melissa Davis called it "the stock market equivalent of a medical miracle."

It seems increasingly likely that reform efforts are over, at least in official circles. The enormous rot in the Wall Street system has been revealed--the personal thievery and institutional disloyalty to customers--but the reform fever peaked last summer when Congress passed modest, first-step legislation, the Sarbanes bill, that set up a new accounting oversight board. The loathsome Mr. Pitt (better known as Mr. Fox) immediately set out as SEC chairman to subvert the measure. He appointed "Judge" Webster to lead the oversight board without sharing the knowledge that Webster himself was in the deep mud of a corporate accounting scandal. Pitt resigned on election night at the very moment the polls closed, insuring minimum public awareness of what happened. Wasn't that cute?

Wall Street gulls the public from behind closed doors. Washington does it in broad daylight but with equal confidence that there will be no serious repercussions. The Bush Administration has deftly managed the financial scandals with hearty housecleaning rhetoric and a few perp walks on the evening news. Democrats did not do much better. This past summer, when they had the votes to correct the scandalous uses of stock options, majority leader Daschle took a dive at the behest of his nervous caucus. Now that Dems are in the minority again, they have even less stomach for hard fights--legislative battles to protect the integrity of pension savings, to restore the Glass-Steagall separations in banking or to restructure finance law to favor trustworthy, freestanding investment firms that are accountable to only one interest--the customers who give them their money. If reform does occur, it must originate elsewhere, from the vigilant Spitzer and other state AGs, from private lawyers suing on behalf of injured investors, perhaps from the rising anger of ordinary citizens who, thanks to the Grubman, finally get the story.

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