[Welcome, Naked Capitalist readers!* If any of you have tips for this series, please feel free to mail me at lambert_strether DOT corrente AT yahoo DOT com. --lambert]

To see why I'm asking this question (after a lapse of a few days) see the posts at Day 1 and Day 2, and here. Now (after reading Krugman today) read James Galbraith:

As a result of the administration's determination to save the big banks, we will emerge from this slump with an unreformed financial sector in the hands of the same people who produced the disaster in the first place. While some bad assets will recover value, many will not, and losses will either go unrecognized or they will be transferred, via the public-private partnerships, first off the balance sheets of the banks and then to the taxpayer, when the mortgages default, via the non-recourse feature of the FDIC's loans. We could assess the likelihood of this happening, if we chose, by the simple step of auditing the loan tapes underlying a fair sample of sub-prime securities, to determine the prevalence of missing documentation, misrepresentation and prima facie fraud. [Fraud that I believe, with Bill Black, amounts to accounting control fraud.] Such a study would constitute minimum due diligence and that fact that one is not underway is a very bad sign.

Doing due diligence before we throw another few trillions at the banks after the stress test kabuki has been performed would seem to be the baseline for any responsible policy maker.

So why isn't Krugman calling for it?

Yes, Krugman's column on torture today is great. But if Galbraith is right, that has huge implications for how effective the Keynsian stimulus is, and that's Krugman's beat. If Krugman believes that Galbraith and Bill Black are wrong, why doesn't he debunk them? If he believes they are right, then why not advocate for them?

Krugman isn't known for being shy about sharing his views; yet the dog is not shrill in the night; that is the curious incident.

What's going on?

NOTE * Yves gave me a link! My life is complete!

NOTE I think the phrase Yves would want you to put in the back of your minds is "accounting control fraud."

UPDATE See also this story in the Times today, thanks to DCBlogger:

MERS — short for Mortgage Electronic Registration Systems — holds 60 million mortgages on American homes. .... MERS is a confidential computer registry for trading mortgage loans .... If MERS began as a convenience, it has, in effect, become a corporate cloak: no matter how many times a mortgage is bundled, sliced up or resold, the public record often begins and ends with MERS. ... But without the chain of title that MERS removed from the public record, banks sometimes recreate paper assignments long after the fact or try to replace mortgage notes lost in the securitization process.

Of course, of course. And I'm totally confident that the banksters "recreated" or "replaced" mortgage notes with the utmost integritude. Not.

In this case, we erected an entire structure of derivatives on the back of assets whose titles weren't in the public domain???? To my simple mind, that looks like an open invitation to fraud. Particularly if all the parties believed that the shell game would never stop, that the hall of mirrors would never shatter, and the assets would never actually need to be examined.