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Bankers love to recount the fabled story of the invisible hand. In their version, the superhero Invisible Hand effectively controls the market, thoroughly trust-busting and fraud-forestalling. Everyone lives happily ever after.

Truth be told, however, the tale of the invisible hand is a horror story. The invisible hand fails miserably to constrain bankster racketeering. It didn’t prevent the market crash in 2008. The ending to that sad saga is recession.

Expecting an invisible hand to control the market is believing in fantasy. It is depending on the ethereal digits of Casper the Friendly Ghost to stop bid-rigging, price-fixing, self-dealing banksters. Casper’s airy little fist packed no wallop when it came to impeding high-risk betting on Wall Street, the LIBOR lending rate manipulation or the disappearance of client money at MF Global. There’s a much better way than Casper to catch a bankster: pay them to turn each other in.

Like delinquent children, bankers chafed under the restraints placed on them after the Stock Market Crash of 1929. Their lobbying chipped away at the regulations until 1999 when they achieved repeal of the most important one, the Glass-Steagall Act.

Within a decade, the market crashed again. Investigators discovered banks had packaged bad loans into securities and pawned them off to unwitting investors. That’s one of the same practices uncovered by a Depression-era inquiry into the 1929 Crash.

This spring, the Securities and Exchange Commission sued Goldman Sachs for its version of that scam. Here is how the SEC explained the ABACUS case:

“Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

But, hey, they don’t need no regulation, right?

Banks have now been sued for their bad behavior on both ends of the mortgage crisis. A U.S. attorney has accused Deutsche Bank of making federally insured mortgage loans without checking, as required and as it claimed it had, on whether borrowers had jobs, savings or any way to repay. The failure of such loans contributed significantly to the crisis.

After no-income-no-asset loans went bad, banks tried to foreclose to get their money back. Many engaged in illegal robo-signing of foreclosure documents and now face lawsuits from defrauded homeowners and municipalities.

But, hey, they don’t need no regulation, right?

Last October, commodities brokerage MF Global went bankrupt with $1.6 billion missing from client accounts. It is accused of wrongly using customer funds to cover capital shortages. As a criminal investigation ensued, bankers described this as a fluke and said it couldn’t happen again.

In fact, shortly afterward a similar fund, PFGBest, posted a note on its website assuring investors it observed all regulations and didn’t co-mingle funds.

And then it happened again. Just last week, PFGBest filed for bankruptcy. The same day, the Commodity Futures Trading Commission charged the firm with fraud and reported $215 million in client money missing.

But, hey, they don’t need no regulation, right?

That’s what Jamie Dimon, CEO of JPMorgan Chase, has said repeatedly since the crash. In fact, Dimon described the arguments that too-big-to-fail banks must be regulated as “infantile” and “nonfactual.” And then his bank lost billions. Billions. Well, at first, Jamie said it was only $2 billion. He dismissed concerns about it as a “tempest in a teapot.”

But then the tempest got really big, like hurricane size. On Friday, Jamie admitted the loss had nearly tripled to $5.8 billion and could rise another $1.7 billion.

Whoops. But hey, Jamie don’t need no infantile regulation, right?

Then there is the LIBOR price fixing case as well as the bank bid rigging convictions just secured by a prosecutor in Manhattan. In LIBOR, Barclays Bank paid $450 million in a plea settlement for manipulating LIBOR, the benchmark for countless interest rate determinations worldwide including those on savings accounts and mortgage loans.

Barclays’ juvenile-sounding defense was this: everybody was doing it. The U.S. Justice Department’s deal with Barclays suggests the bank is cooperating in the investigation of everybody else – which would be the dozen other banks that participate in setting the LIBOR rate, including none other than Jamie’s JP Morgan.

In the Manhattan case, a jury convicted three employees of GE Capital in a decade-long interest rate bid rigging scam that skimmed billions from the coffers of cities and towns. Also involved were virtually every major bank on Wall Street, including Jamie’s JP Morgan.

But, hey, they don’t need no regulation. There’s Casper the Friendly Ghost’s invisible hand, right?

Earlier this month, a survey of 500 American and British financial services executives found that a quarter of them had seen wrongdoing in the workplace and believed it was essential to success. But here’s the most important figure: 94 percent said they’d report wrongdoing if shielded from reprisal and guaranteed financial rewards.

It’s simple: Show them the money. For cash, all honor among thieves vanishes like Casper.

They do need regulation. But in addition, regulators should be equipped with even bigger bribes than they’ve got now to encourage banksters to rat each other out.

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