UPDATE: Two Connecticut hedge fund offices were raided today by the FBI. Another raided in San Francisco.

I'm not in love with the capitalist system, especially the steroid-bloated version of the past 30 years. But if we're going to have capitalism, the only way it can work for small investors is if we have access to accurate information about the risks. In a system rife with insider-trading, small investors don't have a ghost of a chance, so I hope this investigation ends with some high-profile indictments and convictions:

Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according to people familiar with the matter.

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.

One focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide "expert network" services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.

Among the expert networks whose consultants are being examined, the people say, is Primary Global Research LLC, a Mountain View, Calif., firm that connects experts with investors seeking information in the technology, health-care and other industries.

"I have no comment on that," said Phani Kumar Saripella, Primary Global's chief operating officer.

Primary's chief executive and chief operating officers previously worked at Intel Corp., according to its website.

In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.

There was clearly a systemic failure in our finance system, but it required people like Angelo Mizolo to fully exploit it in order to make it collapse. Hopefully this is only the beginning (I'd still like to see Phil Gramm go down):

Angelo R. Mozilo, the self-made man from the Bronx who built Countrywide Financial into the nation’s largest mortgage lender before the credit squeeze hit, has been charged with securities fraud and insider trading in a civil suit brought by the Securities and Exchange Commission.

Citing e-mail messages in which Mr. Mozilo referred to Countrywide loan products as “toxic” and “poison,” S.E.C. officials said that he had misled investors about growing risks in the company’s lending practices from 2005 through 2007. During this time he also generated $140 million in profits by selling stock in the company, the S.E.C. said.

“This is the tale of two companies,” said Robert Khuzami, enforcement director at the S.E.C. “Countrywide portrayed itself as underwriting mainly prime-quality mortgages, using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk.”

At a news conference announcing its filing of the suit, the most prominent against an executive involved in the mortgage crisis, Mr. Khuzami said the S.E.C. had made it a priority “to pursue cases at the root of the financial crisis.” As the nation’s largest mortgage lender, Countrywide helped fuel the housing boom by offering loans to high-risk borrowers.

Isn't it great, how our SEC is such an ardent watchdog of Wall Street's wrongdoing?

CBS News has learned that two attorneys at the Securities and Exchange Commission (SEC) are under "active" criminal investigation by the FBI for trading stocks based on inside information.

Accusations against the two lawyers - a man and a woman whose names have not been released - are detailed in a report by the SEC inspector general obtained exclusively by CBS News.

The report, based on a review and analysis of "more than two years of e-mail and brokerage records," puts increased pressure on a commission that has come under fire lately for failing to detect the $60 billion Bernard L. Madoff Ponzi scheme, and turning a blind eye to the Wall Street financial crisis.

"We ought to be outraged if there is one insider trading information that’s leading to personal profit," Sen. Charles Grassley, R-Iowa, the ranking member of the Senate Finance Committee, told CBS News.

In response to the IG report, Grassley sent a letter to SEC Chairman Mary Schapiro expressing that outrage and requesting detailed information about the stock holdings and trading practices of all SEC employees.

"It’s hard to imagine a more serious violation of the public trust than for the agency responsible for protecting investors to allow its employees to profit from non-public information about its enforcement activities," Grassley said in his letter to Schapiro.

According to the report, the male attorney under investigation by the FBI works in the Office of the SEC's Chief Counsel and "has access to a tremendous amount of nonpublic information."

The report alleges both the male attorney and female attorney - who works in the enforcement division - "traded in the stock of a large financial services company" despite being told by another SEC employee of ongoing "investigations of that company." The report calls this is a direct violation of SEC rules.

Bruin Design: Can you think of a reason why the Bushistas are interested in YOUR phone calls and web surfing habits? How about 8 reasons?

If this story pans out about insider trading taking place out of GOP offices, I think you finally have the poison pill that will drive them out of office. This is very, very big....More

TalkLeft: 22 Retired Military Officers ask Bush to enforce the torture amendment.

Attytood: They say that the payback's a bitch, and it must be true. Just ask America's coal miners.

Crooked Timber: A new winger website promoting the dubious idea that "liberal" professors exert a vise-like grip on the pliable minds of their students.

Thou Shall Not Suck: Sending the aging and aged to a societal landfill. They say that the payback's a bitch, and it must be true. Just ask America's coal miners.

Crooked Timber: A new winger website promoting the dubious idea that "liberal" professors exert a vise-like grip on the pliable minds of their students.

Thou Shall Not Suck: Sending the aging and aged to a societal landfill.

Cafferty: Isn't Frist indicted too?

Monday Funnies

That's not what he said, but Jack blitzed Wolfie today as they were laughing at some of the predictions Cafferty got right on previous shows. Wolf asked Jack for some stock picks and Jack gave him something a little more.

Download | play -WMP Download | play -QT

Jack: Couldn't the republicans find somebody to show the new supreme court nominee around besides the guy who is under investigation by the SEC and the justice department. I mean Bill Frist has a rather large cloud hanging over his head based on--alleged insider trading deals..

Blitzer: He's still the majority leader, but let's....

Wolf quickly changed the subject due to "time constraints."