During the buildup of the housing bubble, one subprime lender stood above all others: Countrywide, which issued $97 billion of subprime loans, nearly $17 billion more than the next largest lender. The bank blew itself up via these loans, and was bought by Bank of America in early 2008.

The $40 billion in losses and thousands of foreclosures caused by Countrywide don’t bother former CEO Angelo Mozilo though, who said that his bank was a “world class company” and that he has “no regrets”:

Mozilo, who led the lender blamed by lawmakers and regulators for contributing to the housing collapse, spoke in a June 2011 deposition as part of a lawsuit between his firm, which was bought by Bank of America Corp. (BAC), and MBIA Inc. (MBI), according to documents filed this week in New York. [...]

Mozilo was responding to questions from an MBIA attorney who asked if he regretted how Calabasas, California-based Countrywide was run after “all the foreclosures and ruined lives and lawsuits.” Mozilo called the lawyer’s question “nonsensical and insulting.”

“I have no regrets about how Countrywide was run,” Mozilo said. “We were a world-class company in every respect.”

Mozilo once called homeowners looking for relief on their mortgages “disgusting” and “outrageous.” Countrywide was also notorious for using VIP loans to secure favorable public policy.

The Justice Department this week announced that it will settle with mega-bank HSBC over charges that the bank facilitated money laundering by drug cartels and terrorist organizations. The bank will pay $1.9 billion as part of the settlement.

The New York Times reported that prosecutors were hesitant to do more because “criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.” In a statement released yesterday, Sen. Chuck Grassley (R-IA) blasted the settlement as a “get-out-of-jail-free card” for the bank:

The Department has not prosecuted a single employee of HSBC—no executives, no directors, no AML compliance staff members, no one. By allowing these individuals to walk away without any real punishment, the Department is declaring that crime actually does pay. Functionally, HSBC has quite literally purchased a get-out-of-jail-free card for its employees for the price of $1.92 billion dollars.

There is no doubt that the Department has “missed a rare chance to send an unmistakable signal about the threat posed by financial institutions willing to assist drug lords and terror groups in moving their money.” One international banking expert went as far as to argue that, despite the “astonishing amount of criminal behavior” from HSBC employees, the DPA is no more than a “parking ticket.”

A former banking regulator added that it is “mind-boggling” how the Department believes that “you can have a financial system and allow this kind of impunity.” Future bank employees with a choice between following the law or profiting from illegal activities will have been taught the lesson that they will never face prison time for their actions. Consequently, this DPA does little to discourage future lawbreakers, and leaves the U.S. financial system highly vulnerable to exploitation by drug cartels and terrorists.

Grassley has consistently opposed settlements that let big banks avoid public accountability. When a judge rejected a settlement between Citigroup and federal regulators, Grassley said, “Judge Rakoff is right to ask for information. The SEC needs to provide a clear rationale for the enforcement penalties in this case and in others. Otherwise, the public is in the dark about whether the settlements are adequate and the court’s role is reduced to a rubber stamp. A settle and slap-on-the-wrist approach has not and will not deter the defrauding of investors.”

Prosecutions for financial fraud hit a 20-year low in 2011.

Since the passage of the Dodd-Frank financial reform law, lobbyists for Wall Street banks have been trying to gum up the implementation of many of its rules. Particular ire has been reserved for the Volcker Rule, which is meant to rein in the sort of risky trading that contributed to the financial crisis.

While the biggest banks may kvetch about the Volcker Rule, the vast majority of the nation’s banks won’t be affected by it, as a new report from Public Citizen finds:

There are 7,181 federally insured banks in the United States. After a new rule is implemented to prohibit banks from making risky trades, the business activities of 7,175 of these banks will remain essentially unchanged. The Volcker Rule, among the most controversial aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act, will prohibit federally insured banks from engaging in proprietary trading, which involves speculation through short-term trades in stocks, derivatives and other securities.

The financial crash, borne of reckless banking practices, cost the economy about $12 trillion, give or take. But Wall Street lobbyists have succeeded in elevating concerns over the relatively minuscule costs of the Volcker Rule to a paramount position in the debate over how regulations should be crafted to implement it. In reality, the Volcker Rule will mean no change, no closure of business divisions, no costs from foregone financial activity, for more than 99.9 percent of banks.

The rule will, according to an estimate by Standard & Poors, reduce profits at the eight largest banks by a combined $10 billion. However, that’s out of a combined $63 billion in profits last year. And S&P also notes that those same banks would be made safer and more stable by the rule. A study by economists Arnoud Boot at the University of Amsterdam and Lev Ratnovski at the International Monetary Fund found that something like the Volcker Rule is necessary to prevent big banks from threatening the whole economy.

Before the Great Recession, the financial sector had consistently been eating up a greater and greater share of the economy. In 2007, it accounted for a whopping 40 percent of corporate profits. Before 1950, the financial sector made up less than 3 percent of GDP; now it makes up more than 8 percent.

According to a new report from Demos, the financial sector siphons off $635 billion annually in funds that otherwise might go to productive uses, rather than flipping financial assets back and forth:

In recent years, the financial sector share of aggregate GDP has been in the range of 8.3%, an increase from the historic level of 4.1%. By inferring that the historical increase in financial sector share of GDP is attributable to the value diverted from capital intermediation, the excessive wealth transfer to the financial sector is in the range of $635 billion per year. In terms of capital investment loss, one would apply a multiplier to the annual wealth transfer figure since recovery of the annual cost to the capital intermediation system would enable greater upfront investment by businesses and governments.

Research has found that a large financial sector can actually impede economic growth. An International Monetary Fund study showed that “at high levels of financial depth, a larger financial sector is associated with less growth. Our findings show that there can be ‘too much’ finance.” Currently, the six biggest banks hold assets equal to 60 percent of America’s GDP.

Wall Street, after giving more to President Obama during the 2008 election than to his opponent Sen. John McCain (R-AZ), flipped during the 2012 election to give the vast majority of its campaign donations to Mitt Romney. As Matt Phillips outlined at Quartz, “individuals affiliated with the banking and finance industries overwhelmingly channeled money towards the Romney campaign,” and now have precious little to show for it:

Folks in the financial industry were decisive in placing their chips on the Republican challenger during this year’s presidential race. And, just to be clear, they lost. [...]

From the hedge fund and private equity industries, more than 82% of the donations went to Romney, $5.7 million. From commercial banks, roughly $4.2 million, or 75% of donations, went to the Republican candidate. By comparison, in 2008 hedge funds and private equity sent nearly 60% of their donations to Obama. And just shy of 58% of donations from individuals tied to commercial banks went to the then-Democratic candidate in 2008.

This shift makes sense, considering Romney’s desire to repeal the Dodd-Frank financial reform law signed by Obama in 2010.

Instead, Wall Street not only has Obama in the White House, but Elizabeth Warren, one of the staunchest bank critics, is headed to the Senate after Wall Street backed her opponent, Scott Brown. The financial industry also favored unsuccessful Senate bids by Dodd-Frank opponents Josh Mandel (OH), Tommy Thompson (WI), Richard Mourdock (IN), and Rick Berg (ND).

Now, Dodd-Frank, assuming that House Republicans don’t entirely cut off funding to financial regulators, will continue to move ahead. Large parts of the law have not yet been implemented, including important reforms to derivatives and the Volcker Rule, which is aimed at reining in risky bank trading.

According to Businessweek, Wall Street is turning its attention next to the so-called “fiscal cliff,” and to lobbying for Erskine Bowles, who helped craft the Bowles-Simpson deficit reduction plan, to be the next Treasury Secretary.

Several European countries have announced their intention to implement a financial transactions tax — a small fee on stock trades meant to raise revenue and slow down some of the high-frequency trading that has come come to dominate world markets. Some U.S. lawmakers have proposed doing the same here, but the idea has gained little traction.

That, however, has not prevented U.S. banks from freaking out about the possibility that Europe will go it alone:

The U.S. financial industry is growing increasingly concerned that a European push to establish a tax on financial transactions could end up on American shores.

The group of investment and business lobbies warned Treasury Secretary Timothy Geithner on Tuesday that while they appreciated the Obama administration’s “sensible” opposition to such a tax, a growing movement in Europe to impose one could throw fragile markets off kilter. [...]

The letter was signed by the Securities Industry and Financial Markets Association, the Financial Services Roundtable, the U.S. Chamber of Commerce and the Investment Company Institute.

A transactions tax, in addition to raising much needed revenue without causing economic damage, would throw some sand in the gears of high-frequency traders. Even one of high-speed trading’s pioneers has admitted that such activity does nothing for the economy: “We are competing at milliseconds,” he said. “And whether you can shave three milliseconds of an order, has absolutely no social value.” 52 financial industry experts, including several former executives at the nation’s biggest banks, said in a letter that a transactions tax “will rebalance financial markets away from a short-term trading mentality that has contributed to instability in our financial markets.”

Wall Street pay this year is expected to increase by up to 10 percent over 2011, according to the latest surveys. And Wall Street financiers think that number Mitt Romney would be even better for their compensation, as Bloomberg News reported:

A win by Mitt Romney in tomorrow’s U.S. presidential election is more likely to boost Wall Street compensation than if voters re-elect President Barack Obama, according to a survey conducted by eFinancialCareers.

The poll of 911 financial-market professionals found 57 percent expect the election to change compensation, while 32 percent said it won’t and 11 percent said they didn’t know, eFinancialCareers said in a statement.

Of those who expect the election to influence pay, 72 percent view a victory by Romney, a Republican, as having a “positive” effect on compensation, the survey found. Re- electing Obama, a Democrat, was viewed as positive for compensation by 18 percent and negative by 71 percent, the survey found.

Romney has vowed to repeal the Dodd-Frank financial reform law, which includes measures aimed at reining in the bad pay incentives on Wall Street. It allows the Federal Reserve to veto pay packages that encourage risk that could lead to a new round of bank bailouts. It also allows for shareholder votes on pay packages; the first negative vote was handed to former Citigroup CEO Vikram Pandit.

High pay on Wall Street has exacerbated income inequality over the last several decades, and while bankers brought in higher and higher paychecks, they took on more and more risk, eventually culminating in a financial crisis. Now, even some Wall Street executives are pushing back against outsized pay packages. Morgan Stanley CEO acknowledged last month that Wall Street pay is “way too high.”

Current House Financial Services Committee Chairman Spencer “serve the banks” Bachus (R-AL) will have to give up his gavel in the next Congress due to committee term limits. His likely replacement is Rep. Jeb Hensarling (R-TX).

Acknowledging that Hensarling will hold the reins, banks and other financial firms are pouring money into his campaign coffers, despite the extremely safe Republican district in which he is running:

Campaign money has flowed Hensarling’s way, much of it from insurance companies, securities brokers, investment firms and banks. Together, employees of those industries or their political action committees have donated $630,447 to his campaign, according to the Center for Responsive Politics.

Hensarling’s fundraising haul this year is 66 percent more than he received in 2010, when Republicans surged to win control of the House. [...]

Separately, Hensarling has raised $967,421 for his political action committee, another source of money to donate to Republicans. JPMorgan Chase is the largest source of donations to Hensarling’s leadership PAC. Other major donors include hedge fund Mason Capital Management and Bank of America.

The financial sector is far and away Hensarling’s largest contributor, giving him $1.6 million overall in this cycle alone. According to the Center for Responsive Politics, his next largest set of contributors — “miscellaneous business” — gave him $232,000.

As Financial Services Committee Chairman, Hensarling can be expected to continue the House Republican assault on the Dodd-Frank financial reform law. Hensarling was a staunch opponent of Dodd-Frank when the law was being debated, and particularly the law’s creation of the Consumer Financial Protection Bureau. He also called a tax on big banks “frankly lunacy.” Now he is poised to be the big banks’ top man on the Financial Services Committee as it attempts to cripple Dodd-Frank.