Yesterday, the FBI arrested two mid-level Bear Stearns investment bankers for intentionally over-valuing mortgage-backed securities even while their real value was plummeting. One of the bankers, Ralph Cioffi, valued one of the funds as having lost 6.5% in April, even while colleagues were valuing the same fund as losing 18.97% in that single month.

Now, of course, from all the major investment banks and global banks with investment arms comes the chorus of promises to self-monitor. (I’ve seen this play before. Have you?) Credit Suisse, Merrill Lynch, Morgan Stanley, and Citigroup are all rushing into the spotlight to assure the press and the public that they are cracking down on this sort of thing. Hard.

Sure they are. NOW they are. But how long will that last?

I predict it will last exactly as long as lower-level bankers are still being arrested and the whole thing is still in front of the press. Excuse my cynicism, but bankers today are under unbelievable pressure to make their employers money whatever the cost to their own integrity and safety. I’m not saying this excuses Bear Stearns Ralph Cioffi and Matthew Tannin, but I am saying that it is disingenuous in the extreme for corporate management to be out in front of cameras behaving like it is all very shocking and they certainly will not be tolerating any more of this, no sir. Juz terribul. Oh my!

In the past year alone several prominent CEOs retired early with huge golden parachutes after losing the financial institutions that employed them billions of dollars. They are not in jail. They have more money than God, and this as a reward for destroying the corporations that employed them through raw greed, financial mismanagement, bad investment decisions, and more than anything else, slippery underwriting practices and sleazy sub-prime mortgage deals. I guess if you are a CEO it’s OK. If you are a midlevel banker at an investment firm, you’re goin’ down, buddy!

It’s pretty hard to feel sorry for investment bankers. (Ever see the film ‘Boiler Room?’) On a personal ‘yuck’ chart they rank somewhere between insurance and car salespersons and attorneys; they move a little higher or lower depending on the firm. Still, the whole spectacle yesterday reminded me somewhat of the Abu Gharib scandal, in which a few low-level soldiers were hauled in front of cameras, charged, upbraided, and publicly shamed for actions that clearly originated in the offices of Donald Rumsfeld and Dick Cheney.

The soldiers deserved the court marshals. Where are the trials for Cheney and Rumsfeld?

Ever since Reagan, we have been singing the praises of deregulation and laissez-faire capitalism, and this is what it has brought us to. Now, all the weasels are scrambling for nice deep holes to hide in before any camera lights are shined in their direction.

When will we ask the bigger questions?

When will we say, you know what? This corporate model is not working very well. The financial industry is in a mess that verges on total collapse. The entire US has been gravely affected by it, and month after month it just gets worse and worse. When will we ask, How can we regulate the financial industry so this doesn’t happen for another 100 years or so?

Because it will happen again, you know it will. It’s the nature of the beast. The safeguards put in place after the Great Depression to prevent banks from collapsing, and the regulations put in place at that time are, by almost universal consensus, no longer working. That is because investment bankers have found ways around them, and retail banks and mortgage lenders, hungry for bigger bonuses and the chance to impress stockholders, have snapped up every chance to circumvent or slide under the law, just to make that extra buck. That’s what capitalism is all about.

The extra bucks have all floated to the top (what ever happened to the ‘trickle down theory?) and now the rest of us can’t afford to get to work. The entire economy is severely out of whack, so severely out of whack that no one even understands it anymore. Why not? Because it has never been this bad.

People who work for a living, or are laid off for a living, know this. Over 90% of us live on less than 50% of the money made in the US, and now that money is not being made. Fewer and Fewer people are working at all. Arresting a couple of suits and parading them around on TV is not going to fix any of that.

US prisons are already holding more people than any other country in the free world. Is there room in them for all the bankers who are breaking the law, or have done so during the housing bubble and the mess that followed? Probably not, but the image of shoving a bunch of bankers into shared cells with murderers, drug dealers, and child molesters is a compelling (and I confess, oddly appealing) one. Would they get tattoos? Would they become somebody’s bitch? Would they take up smoking?

Are there any Starbucks in prisons?

At the very least their presence would help even out the racial inequality in prisons across our nation. But until somebody addresses the underlying problem, it’s really just a big show.

Don’t hold your breath waiting for the big guys to go down.

They’re still in office until after November.