There was a strange moment last week during President Obama's speech at Cooper Union. There he was, groveling before a cast of Wall Street villains including Goldman Sachs chief Lloyd Blankfein, begging them to "Look into your heart!" like John Turturro's character in Miller's Crossing...when out of the blue, the POTUS dropped this bombshell: "The only people who ought to fear the kind of oversight and transparency that we're proposing are those whose conduct will fail this scrutiny."

The Big Secret, of course, is that every living creature within a 100-mile radius of Cooper Union would fail "this scrutiny"--or that scrutiny, or any scrutiny, period. Not just in a 100-mile radius, but wherever there are still signs of economic life beating in these 50 United States, the mere whiff of scrutiny would work like nerve gas on what's left of the economy. Because in the 21st century, fraud is as American as baseball, apple pie and Chevrolet Volts--fraud's all we got left, Doc. Scare off the fraud with Obama's "scrutiny," and the entire pyramid scheme collapses in a heap of smoldering savings accounts.

That's how an acquaintance of mine, a partner in a private equity firm, put it: "Whoever pops this fraud bubble is going to have to escape on the next flight out, faster than the Bin Laden Bunch fled Kentucky in their chartered jets after 9/11."

And that's why this SEC suit accusing Goldman Sachs of fraud is really just a negotiating bluff to give Obama's people some leverage--or it's supposed to be, anyway--according to the PE guy. He dismissed all the speculation that the fraud investigations would turn on other obvious villains like Deutsche, Merrill, Paulson & Co., the Rahm Emmanuel-linked Magnetar and so on.

"You don't get it, Ames. Even Khuzami, the SEC guy in charge of the Goldman case, is a fraud; the fucker was Deutsche's general counsel when they pulled the same CDO scam as Goldman. You have no idea how deep this goes."