Mary Miller, a Treasury Department official seen as the expected pick for the next head of the SEC, dropped out of contention yesterday, leaving an unclear path forward. Elisse Walter, who was designated as the new chair, replacing the departing Mary Schapiro, is seen as a stopgap pick. But her elevation to the top slot means that the SEC is one member down on its commission, with a 2-2 split between Democrats and Republicans. This will likely stall out almost all its important initiatives in the coming months until a new commissioner gets nominated and confirmed, and unless the Administration wants to give credence to the theory that they want to tie the bureaucratic hands of a key financial regulator, they need to nominate someone soon.

Speculation has focused not on a career prosecutor or someone with a record of tough oversight of the financial industry, but Sallie Krawcheck, “a longtime Wall Street executive” from Bank of America, and Robert Khuzami, the current head of enforcement.

Schapiro’s replacement matters. Simon Johnson kicked this off a few days ago, juxtaposing the bona fides of Treasury Department under secretary for domestic finance Mary Miller (a former mutual fund executive) against former Special Inspector General for TARP Neil Barofsky. There’s no question than an experienced prosecutor like Barofsky would change the SEC’s culture, but there’s almost no chance he will ever hold another job in Washington, as he was specifically told by Herb Allison right at the beginning of his book Bailout.

Continuing on the theme of prosecutions for fraud during the housing collapse, though in this case civil rather than criminal ones, New York Attorney General Eric Schneiderman just announced a new lawsuit against Credit Suisse for defrauding investors in its mortgage backed securities business. The case mirrors the previous suit filed by Schneiderman against JPMorgan Chase over Bear Stearns’ MBS business. Curiously, both of these banks engaged in settlements just this past weekwith the SEC over precisely the same conduct, settlements where they didn’t have to admit wrongdoing.

The delay in bringing the case cost tens of billions of potential exposure for JPMorgan Chase. And more than anything, the lack of federal participation in the suit shows that the federal agencies involved in the task force are simply disinterested in prosecution, forcing Schneiderman to cobble together an off-the-shelf suit from other sources to make it look like this move against the banks represents anything real. The timing, one month before voters go to the polls in the Presidential election, is similarly obvious.

Yesterday, Bank of America fired off one of their biggest settlements yet, spending $2.4 billion to quiet claims with investors over their purchase of Merrill Lynch.

This was outright securities fraud, and I’m more than surprised that the investors plaintiffs, led by public pension funds in Ohio and Texas, accepted this.

It’s easy to salute and say Yes Sir. It’s too hard to regulate, investigate and prosecute.

Pro Publica, in conjunction with NPR, reported that Freddie Mac invested millions betting against home owners paying their mortgages, meaning that had a conflict of interest in helping owners refinance to avoid foreclosures. That’s somewhat tangential to what Eric Schneiderman wants to delve into because it’s post-crash conduct, but it still shows the element we’re dealing with and how many revelations are already out there

Douglas Holtz-Eakin, a Republican commissioner on the FCIC who did not sign onto the final report, made some statement to the media about how the FCIC already investigated the areas of inquiry concerning the crash of the housing bubble and found no criminal wrongdoing. But the Chair of the FCIC, Phil Angelides points to the FCIC’s report noting there were criminal referrals, and that was a year ago.

When your thoughts turn to helplessness regarding the corporate control of government and the dissolution of the rule of law, think about what one motivated federal judge can do. Judge Jed Rakoff’s ruling blocking an SEC settlement with Citigroup over mortgage backed securities misrepresentations has had major ripple effects (and not just with Matt Taibbi). Of particular interest to many was the SEC’s peculiar wording in almost all of their financial fraud cases, allowing the settlement partner to “neither admit or deny” wrongdoing. This limits the exposure of the offending party in other civil and criminal suits. It was the part that Rakoff objected to the most.

And this had an immediate impact.

Until now, only the State Attorney General could bring action under the Martin Act, a securities fraud law in New York State that is much more expansive than federal statutes. Typically the plaintiff must prove intent to commit fraud; under the Martin Act the plaintiff need only prove that fraud was committed. Now, as a result of a new ruling, any aggrieved private actor can use the Martin Act as part of their lawsuit. This empowers investors of all sizes to go after the banks on securities fraud.