The Financial Crisis Inquiry Commission is better than its reviews but still very disappointing. Its 545-page report represents a powerful, fact-filled indictment of the financial system and the leading players and institutions that produced the national catastrophe. But there is one glaring omission—the massive fraud that occurred on Wall Street.

Some leading economists and former regulators (not to mention citizens at large) think fraud is a central explanation for what went wrong. The commission’s conclusions skip lightly over the matter—both civil fraud and go-to-jail criminal fraud.

In this regard, the FCIC report resembles a giant haystack sprinkled with sharp needles. Somewhere in the FCIC’s daunting details are explosive revelations. But can citizens find or understand them? Not very likely; the six Democratic commissioners who produced the final report don’t mention any needles or provide any clues about how to find them. Instead, the commission blandly states that it has referred “potential violations” to “appropriate authorities.” But it won’t say how many cases were passed along to prosecutors or whether they involve big-name bankers or low-level clerks forging mortgage documents.

“Our job is to bring out the facts. It is the prosecutor’s job to prosecute the facts,” commission chair Phil Angelides insisted when I badgered him on this point. With some outside prompting from bloggers and other informed observers, I was able to locate a couple of needles amid the voluminous text. They implicate some of the best names on Wall Street. But for whatever reasons, the commission Democrats framed their findings in broadly critical accusations about the financial industry, government regulators, the Federal Reserve and others whose failures caused the eventual collapse. “We conclude this financial crisis was avoidable,” the commissioners declare. The FCIC’s facts confirm that judgment. Read the report or graze the 1,200 documents posted on the FCIC website ( You will doubtless come away dizzy but enlightened and angry.

For instance, I choked on this language: “As a nation, we must also accept responsibility for what we permitted to occur. Collectively, but certainly not unanimously, we acquiesced to or embraced a system that…gave rise to our present predicament.” That sounds like the same self-serving baloney the establishment can be counted on to deploy to avoid blame.

If everyone is to blame, then no one can be blamed. This reminds me of when the Iraq War went bad, and the Bush administration couldn’t find the WMDs. People who had led cheers for war started saying, “Well, we were all fooled, weren’t we?” No, we were not. Congress and the Obama administration took a similar tack on the financial crisis. It would be wrong and vengeful, they said, to point fingers at major miscreants. In this complacent milieu, referring cases to the Justice Department is not exactly comforting. Angry citizens want to know why more people didn’t go to jail.

For one example of the FCIC’s buried treasures, turn to page 165 and read about the true meaning of “due diligence.” In 2006–07, an auditing firm, Clayton Holdings, was hired to examine some 900,000 mortgages. It found that 255,000 (28 percent) were flawed and should not have been packaged as mortgage-backed securities. Clayton’s president delicately described the high deficiency rate as “a quality control issue.” But the banks went ahead and included nearly 100,000 of the dubious loans in new securities anyway, without informing the buyers. “They knew a significant percentage of the sampled loans did not meet their own underwriting standards or those of the originators,” the FCIC concluded. “Nonetheless, they sold those securities to investors. The Commission’s review of many prospectuses provided to investors found that this critical information was not disclosed.”

This smells like old-fashioned investor fraud. The biggest players were Citigroup, JPMorgan Chase, Bank of America, Morgan Stanley and three leading European banks. The FCIC observed that this sleight-of-hand occurred when the housing market began to collapse and banks were eager to dump their rotten assets. It has provided a wealth of material evidence for the growing flood of investor lawsuits. Even the Federal Reserve is suing financiers to recover on the bad assets it was sold.

Shouldn’t someone go to jail? Determining criminal intent is always difficult. Corporate law is a thicket of exemptions and clever distinctions designed to shield the big boys at the top. If the feds got serious, they would apply the same techniques used against Mafia dons. First “squeeze” lesser players down below—traders, salesmen, accountants—then “turn” them into government witnesses. Build a chain of evidence against those who knew the score and gave the orders. What did the titans know and when did they know it?

If President Obama wanted to address the random rage accumulating around the country, this could be his issue (Republicans are freaked out by any suggestion that capitalists did anything wrong). Instead of ignoring the FCIC report, the president should embrace its content and demand an aggressive follow-up by federal prosecutors and regulatory agencies.

The issue at stake here is far more threatening than smug elites seem to understand. Nothing erodes the authority and legitimacy of government more severely than a spreading awareness of unequal justice. The feds send hapless drug mules to prison for twenty years. For billion-dollar swindles, they won’t even call a grand jury. This corrosive contradiction can become a national disease. Americans are learning from these events—another investigation with shocking evidence, but not much happens afterward. This will sound farfetched, I know, but this is a road that leads eventually to Cairo.