BILL MOYERS: Welcome. This week, two United States senators insisted that the Justice Department come clean. Why are Wall Street’s big banks not only too big to fail but too big to jail? Senators Sherrod Brown of Ohio, a Democrat, and Chuck Grassley of Iowa, a Republican, are outraged that the giant banks violate the law with impunity -- laundering money, cheating homeowners, falsifying information -- every trick in the ledger book. They sent a letter to Attorney General Eric Holder demanding to know why the banks get away with fines instead of jail time.

Maybe they had their anger roiled by “Frontline,” Public Television’s premier investigative series. The other night, “Frontline” broadcast a report called “The Untouchables,” on how the Department of Justice allegedly has looked the other way for fear that prosecuting the banks would do even more damage to the American economy.

ELIOT SPITZER in Frontline: The Untouchables: It was a definite sense that justice backed off.

NARRATOR in Frontline: The Untouchables:Did the government fail?

MARTIN SMITH in Frontline: The Untouchables: A number of people told us that you didn’t make this a top priority.

LANNY BREUER in Frontline: The Untouchables: Well I’m sorry that they think that because I made it an incredibly top priority:

BILL MOYERS: That’s Lanny Breuer, the assistant attorney general in charge of the criminal division at the Justice Department. A week after the Frontline report, he stepped down and is now expected to return to private corporate practice -- one more government appointee spinning through the lucrative revolving door between Washington and Wall Street.

That door could be a big reason why government treats the banks with kid gloves. A man who once worked for Citigroup, Jack Lew, the president’s chief of staff, has been picked to be the new Treasury Secretary. And Mary Jo White, the newly named head of the Securities and Exchange Commission, is a chief litigator at a top law firm representing big investment banks like Morgan Stanley.

With all this happening, it’s time to talk with journalist Matt Taibbi. You’ve seen him on our broadcast before. A contributing editor at “Rolling Stone,” he’s been tracking the high crimes and misdemeanors of Wall Street and Washington for years.

Welcome back to the show.

MATT TAIBBI: Thanks for having me.

BILL MOYERS: You're working on a story right now that'll come out in a couple of weeks on the HSBC settlement. That's the, tell me about that, why it interests you.

MATT TAIBBI: Well, the HSBC settlement was a really shocking kind of new low in the history of the too big to fail issue. HSBC was a serial offender on the money laundering score. They had been twice given formal cease and desist orders by the government. One dating back as far as 2003, another one in 2010 for inadequately policing the accounts in their system. They laundered over $800 million for cartels in Colombia.

BILL MOYERS: Drug cartels?

MATT TAIBBI: Drug cartels in Colombia and Mexico. They laundered money for terrorist connected banks in the Middle East. Russian gangsters. Literally, you know, I talked to one prosecutor who's, like, "They broke basically every law in the book and they did business with every kind of criminal you can possibly imagine. And they got a complete and total walk." I mean, they had to pay a fine.

BILL MOYERS: $1.9 billion, a lot of money.

MATT TAIBBI: It's a lot of money. But it's five weeks of revenue for the bank, to put that in perspective. And no individual had to suffer any consequences at all. There were no criminal charges no individual fines, which was incredible. Incredible.

BILL MOYERS: Lenny Breuer also forced the Swiss bank UBS, as you know, to pay a big fine in the LIBOR, the price fixing conspiracy. And that outraged you as well, didn't it?

MATT TAIBBI: This is the, I think the biggest financial scandal of all time. It was a price fixing scandal where, essentially, some of the world's biggest banks got together and they conspired illegally to artificially rig the global interest rates which are based upon this London inner bank offered rate, which is a rate that measures how much it costs for banks to lend money to each other.

This LIBOR rate affects the prices of hundreds of trillions of dollars of financial products. And it goes from everything from credit cards to mortgages to municipal bonds. Basically everything in the world the price is, you know, is somehow connected to LIBOR. And these guys were monkeying around with this for individual profit. And they got, again, a complete and total walk on this. There were no criminal charges, which is just unbelievable.

BILL MOYERS: Did you see the Frontline documentary “The Untouchables?”

MATT TAIBBI: I did.

BILL MOYERS: Then you're familiar with Lanny Breuer's testimony.

MARTIN SMITH in Frontline: The Untouchables: You made a reference to losing sleep at night worrying about what a lawsuit might result in at a large financial institution. Is that really the job of a prosecutor to worry about anything other than simply pursuing justice?

LENNY BREUER in Frontline: The Untouchables: I think I am pursuing justice and I think the entire responsibility of the department is to pursue justice, but in any given case, I think I am prosecutors around the country being responsible should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case there’s some huge economic effect. If it creates a ripple effect so that suddenly counter-parties and other financial institutions or other companies that had nothing to do with this are affected badly, it’s a factor we need to know and understand.

MATT TAIBBI: Think about what he's saying. He's essentially saying that some individuals are so systemically important, that they can't be arrested and put in jail. Now, it's only a few steps forward to the corollary to that, which is if some people are too systemically important to arrest, other people may safely be arrested. So we're creating a class of people who are arrestable and another class of people who are not arrestable, which is crazy. It's a crazy thing for the assistant attorney general to say, to admit out loud that he's dividing Americans up into these two classes. There's no reason they couldn't have taken a number of individuals from some of these companies and put them on trial.

Historically, we've always done this. Even under the Bush administration, if you go back just ten years, you know, WorldCom, Enron, you know, Adelphia. We took the leading individuals of these companies and we put them on trial to make an example out of them. And this is exactly what we're not doing in this case. Those companies were systemically important then. I don't see why they can't do the same thing now.

BILL MOYERS: You were shocked when you heard that President Obama had named Mary Jo White to lead the Securities and Exchange Commission. And you wrote that she was a partner in a law firm that represented a lot of these big banks. You know, Bank of America, Goldman Sachs, Chase, AIG, Morgan Stanley.

You said, "She dropped out and made the move a lot of regulators make, leaving government to make bucket loads of money, working for the people she used to police." And I gather your great concern is that you don't want to see the country's top financial cop being indebted to the people who created the bank role?

MATT TAIBBI: Right. Yeah, absolutely. I mean, it's just simple common sense. I mean, you're sitting on $10 million, $15 million, however much money she made working there at Debevoise and Plimpton when she was a partner and you owe that money to this specific group of clients and now you're in charge of policing them, just psychologically think of that. It doesn't really work, you know? It doesn't really work in terms of how aggressive a prosecutor should be, what his attitude towards the people he's supposed to be policing should be. It's just, the circumstances just aren't quite right. You'd much rather see a career civil servant in that in that situation.

BILL MOYERS: She was once a tough prosecutor. What's your beef?

MATT TAIBBI: Well, you know, I have people who are telling me that I'm wrong about this, that Mary Jo White was an excellent prosecutor and she's a good choice. But, you know I've done stories in the past about an episode, you had an SEC investigator named Gary Aguirre who was pursing an insider trading case against the future CEO of Morgan Stanley. He asked for permission to interview that future CEO. His name was John Mack. It was denied. And it was because there was communication between Morgan Stanley's lawyer, who at the time was Mary Jo White and the higher ups at the SEC who included the director of enforcement, Linda Thomsen. Aguirre was later fired for complaining about having this investigation squelched.

BILL MOYERS: Blowing the whistle.

MATT TAIBBI: For blowing the whistle. But the SEC was later forced to pay a $750,000 wrongful termination suit to Aguirre in that case. But what's so interesting is that Aguirre's boss, the guy who killed that case went to work for Mary Jo White's firm nine months after the case died. And he got, you know, a multi-million dollar position. It's a classic example of how the revolving door works in Washington. You know, you have these regulators at the SEC. And they know that there's that job out there waiting for them. So how hard are they really going to regulate these companies when they know they can get that money?

But in Washington, you know, people kind of shake their heads at it because it's so common you know, that these people, they move from government back to, you know, these high priced legal defense firms that represent the banks. And then they go back to government again. And it's this sort of, this coterie of, you know, 100, 200 lawyers who really run this entire thing. And it's all the same people on both sides.

BILL MOYERS: Lanny Breuer was one of them. He was in a very prestigious Washington law firm. Jack Lew, the new incoming secretary of the Treasury if he gets approved, served three years at Citigroup. His record there, according to “The Wall Street Journal” was not very lustrous for a man who's about to take over the Treasury Department. But “The Wall Street Journal” suggests that he got his job, not because he had the experience, but because he was a crony of Robert Rubin.

MATT TAIBBI: Jack Lew served in the Clinton administration. I think he worked in the OMB in the, you know, Office of Management of the Budget. And he was one of the key players in helping pass the repeal of Glass-Steagall. And, you know, this is kind of the way it works. It's not a one to one, you know, obvious connection. But, you know, Glass-Steagall was repealed specifically to legalize the merger of Citi Group. And, you know, coincidentally Bob Rubin, who was the Treasury secretary and Jack Lew end up working at Citi Group five, ten years later. And they make enormous amounts of money. And then they go back to government. And again, this is just sort of this merry-go-round that everybody in Washington knows about. And that's the way it works.

BILL MOYERS: How do you explain President Obama's attitude in this? When he was running for president, he promised the close the revolving door. And he seemed genuinely shocked at the collapse of the financial system and the banks' role in it. But he also was raking in massive campaign contributions from these very people. Did those investments, did those contributions turn out to be good investments, or do you think he's just overwhelmed by the system that's controlled by these guys?

MATT TAIBBI: I think that they genuinely accept the explanation that they're probably hearing from all these people who run these Wall Street companies. You know, people like Bob Rubin and Larry Summers who are close confidants of the Obama administration are probably telling them, "Look, if we start prosecuting all kinds of people for you know, X, Y and Z, there's going to be major instability in the markets. People are going to flee America. They're going to withdraw capital from the American financial system. It'll be a disaster. Jobs will be lost." But it's just not an acceptable it's explanation. I think they're--

BILL MOYERS: Why?

MATT TAIBBI: Well, just because the rule of law isn't really the rule of law if it doesn't apply equally to everybody. I mean, if you're going to put somebody in jail for having a joint in his pocket, you can't let higher ranking HSBC officials off for laundering $800 million for the worst drug dealers in the entire world. People who are suspected, not only of dealing drugs, but of thousands of murders. I mean, this is an incredible dichotomy. And eventually, you know, it eats away at the very fabric of society when some people go to jail and some people don't go to jail.

BILL MOYERS: But do you ever have the sense that those guys are, you know, are and their lawyers are up there laughing at all of us on their way to the bank, no pun intended? I mean, the fact of the matter is they are immune. There was a story in “The Washington Post” the other day by Howard Schneider and Danielle Douglas. With the lead, "Five years after the collapse of Lehman Brothers, a global push to tighten financial regulation around the world has slowed in the face of attempted recovery, which the banks helped bring on. "And a tough industry lobby effort. Big banks, insurers and other financial giants remain intact and arguably too big to fail." I mean, nothing really has changed.

MATT TAIBBI: No, no, definitely not. And in fact, if you want to look at it objectively, since 2008, you know, the companies that we're talking about have become bigger and more dangerous and more immune to prosecution than they were back then. And you might even say by a lot. I mean, you know, the first factor was that you had a series of mergers in 2008, which you know, made companies like Wells Fargo and JP Morgan Chase, you know, double in size.

Or they were much bigger than they were before. So therefore they're more dangerous. And so you have these companies, like Barclays, like Royal Bank of Scotland, like UBS, like HSBC, which are, you know, they can't be regulated. We can't get an accurate accounting of what's going on in their books. And apparently now we can't even criminally prosecute them for laundering money like HSBC does. I mean we just keep setting the bar lower and lower and lower. And it's getting scary I think.

BILL MOYERS: There's a new analysis out just the other day from the Economic Policy Institute that shows the super-rich have done well in the economic recovery, while almost everyone else has done badly. And the economist Robert Reich says, "We're back to the widening inequality we had before the big crash." Are the financial and political worlds just too intertwined and powerful for anything to change?

MATT TAIBBI: I mean, it's a concern, I would worry about. But it doesn't mean you can't, you know, try to stop the problem. I definitely think though that there is this connection now between political power and financial power that's just becoming more and more overt. I mean, what Lanny Breuer is saying in that video is these people who have an enormous amount of power, destructive financial power we can't prosecute them.

On the flip side what they're essentially saying is that people who don't have any money at all, it's politically safe to put them in jail. And so, you know, we're creating this kind of dual class. And it's a very upsetting and disturbing situation.

BILL MOYERS: Matt Taibbi, we'll be looking forward to your next expose in a couple of weeks. Thank you very much for being with us.

MATT TAIBBI: Thanks for having me on.