I think Felix Salmon uses the right word – collusion. This is regulatory capture of the first order. It’s different from constructing deliberately complex and confusing rules that will never be administered, or just looking the other way at misconduct. This generates the illusion of regulatory enforcement while letting off the offending parties for next to nothing.

The exact same premise is at work with the Obama Justice Department’s attempted get out of jail free card for foreclosure fraud. It certainly makes the banks happy, but it’s also a primary reason why there are protesters in Zuccotti Park and across the country.

Over the weekend, as Occupy Wall Street protests escalated, the video of a woman arrested at a Citibank branch for trying to close her account shot through the blogosphere. It wasn’t even the only example of people being denied the opportunity to close their bank accounts over the weekend. And a similar incident occurred two months ago.

We have already heard about JPMorgan’s travails with Bernie Madoff’s Ponzi scheme. A recent report identified JPMorgan as complicit in the Madoff scheme, and potentially liable in a civil lawsuit. According to emails and documents, JPMorgan apparently knew something was amiss with Madoff’s performance figures but never reported the crime to the SEC. Some lawsuits have already been filed. In addition, JPMorgan sold certain derivatives links to Madoff’s returns, giving them a major financial incentive not to disrupt the scam, off of which they profited.

Now we’re learning about how Citi was connected to the Madoff scheme as well, from a report by the same trustee who busted JPMorgan Chase.

I attended a Huffington Post Mortgage Madness Meetup in Los Angeles last night, which suffered from some late planning, the buggy nature of the Meetup tool and the general difficulty of self-organizing. Only a half-dozen people showed, and most of them were either media (a guy from NPR’s Marketplace) or interested observers in the foreclosure mess. In fact, the one homeowner with a story to tell arrived late and almost didn’t make it because he went to the wrong location initially. But oh, what a story he had to tell. And while I’ve heard a lot of these HAMP horror stories in the past year, I’ve never heard anything like this.

Shahien Nasiripour’s article about Citibank’s near-bankruptcy in November 2008 shows how silly it is to expect safety by creating a “systemic risk council,” one headed, I might add, by Tim Geithner. He basically applies the Potter Stewart principle to systemic risk, saying that he’ll know it when he sees it. And somehow, I’d guess that he’ll see systemic risk in any big bank that goes down.

On Tuesday, Iowa’s Attorney General Tom Miller testified to the Senate Banking Committee it would be months before the combined AG “investigation” came up with a settlement. That’s almost exactly the moment when the Washington Post posted a story reporting the AGs were close to a settlement.

Let me make a rare statement: I agree with just about everything Sen. Richard Shelby (R-AL) said in his call for an investigation of mortgage servicers. But Shelby’s choice of targets sure does bear watching.

Remember WhereIsTheNote?

In the face of mounting evidence that the banks foreclosing on homes did not comply with legal requirements during securitization of mortgages and therefore don’t have legal standing to foreclose, the SEIU and some community organizations teamed together last month to create an online tool that anyone can use to ask their mortgage servicer where their note is. By helping homeowners proactively check whether their bank has the right paperwork, it gives them more power in the event of a foreclosure.

The site launched just over three weeks ago. 200,000 people have visited the website; around 15,000 have used the tool to ask their bank for their note (I’ll have a more exact number shortly).

I wanted to return to a detail I mentioned in yesterday’s book salon. As I noted, in his book on the auto bailout, Steven Rattner described Citi as being worried during the Chrysler negotiations that retail customers would retaliate if Citi played hard ball.

I come to Steven Rattner’s Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry from a very particular perspective. As a Michigander whose husband still works in the auto industry and whose town has benefited from battery subsidies, I’m a grateful direct beneficiary of the work the Obama Administration did to save the auto industry. But that also means I read this book, which might have been subtitled, “Wall Street gapes at Detroit” from the perspective, “Detroit gapes back at Wall Street.”