It's so nice to hear a high-profile senator asking the same question that's been on the minds of voters for some time now. Fortunately, Sen. Warren is popular enough that the bankers are a tad afraid of her:

In a letter (PDF) sent to Federal Reserve Chairman Ben Bernanke, Attorney General Eric Holder and SEC Chair Mary Jo White on Tuesday, Sen. Elizabeth Warren (D-MA) demanded to know why the government keeps accepting financial settlements from criminal bankers when they could instead be taken to trial, convicted and locked up.

In six short paragraphs, Warren requested that each institution turn over copies of any internal research “on the trade-offs to the public” between letting big financial firms pay a fine and walk “without admission of guilt” versus moving forward with full-scale prosecutions.

The letter was sent as a follow-up to a similar question she asked of the Office of the Comptroller of the Currency (OCC) on Feb. 14. Warren noted that the OCC replied last week denying the existence of any such research. In her letter sent Tuesday, she went on to add:

…I believe very strongly that if a regulator reveals itself to be unwilling to take large financial institutions all the way to trial — either because it is too timid or because it lacks resources — the regulator has a lot less leverage in settlement negotiations and will be forced to settle on terms that are much more favorable to the wrongdoer.

The consequence can be insufficient compensation to those who are harmed by illegal activity and inadequate deterrence of future violations. If large financial institutions can break the law and accumulate millions in profits and, if they get caught, settle by paying out of those profits, they do not have much incentive to follow the law.

There’s been a rash of mega-settlements between the government and the nation’s largest banks in recent years over allegations of foreclosing on people without just cause, knowingly making bad loans and reselling the debt, making false statements to rob from retired pensioners, laundering money for drug cartels, repressive regimes and terrorists, and agreeing to settlements and then ignoring them, to name a few.

“The problem is the banks have overwhelming confidence that law enforcement is not taking this seriously,” New York Attorney General Eric T. Schneiderman said last Monday, appearing on MSNBC.

“They have overwhelming confidence that whatever the rules are, they won’t be followed up on.”