SEC Door, Spinning Mightily, Smacks Investors

Some of these securities were so poorly underwritten that one of Deutsche Bank's own traders, Greg Lippmann, referred to them as "crap" and "pigs," according to a 2011 report about the crisis by the U.S. Senate Permanent Subcommittee on Investigations, and was one of the people who famously bet (correctly) that they would fail. "I don't care what some trained seal bull market research person says this stuff has a real chance of massively blowing up," Lippmann wrote in an August 2006 e-mail.

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Stands to reason, of course, that Khuzami would be just the guy you would want to head up enforcement at the SEC after the financial crash, if the goal were to make sure Wall Street didn't get too roughed up. With the help of his former boss, Walker -- who remains Deutsche Bank's general counsel and is a member of its powerful management board -- Khuzami got the SEC job in February 2009. While there, he received favorable news coverage for supposedly revitalizing a moribund enforcement effort.

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The truth is, aside from the SEC's prosecution of Fabrice Tourre, the Goldman Sachs Group Inc. vice president who was just found liable for intentionally misleading participants in a failed $1 billion Goldman CDO, Khuzami's enforcement division was particularly toothless. Sure, there was the $550 million settlement with Goldman in 2010, over the infamous Abacus CDO at the root of the Tourre case, but Goldman was a piker in that market compared with Deutsche Bank.