When due-diligence reports turned up large numbers of defective loans — known as exceptions — the banks used this information to negotiate a lower price on the mortgages they bought from the original lenders.

So, instead of paying 99 cents on the dollar for the problem loans, the firm would force the lender to accept 97 cents or perhaps less. But the firm would still sell the mortgage pool to investors at 102 cents or higher, as was typical on high-quality loan pools.

And nobody’s gone to jail for it or been arrested.

The question is whether the small-print legalese that Wall Street made sure to bury in its thousand-page prospectuses is enough to cover its rear end. The answer ought to be a resounding no.

The Clayton story is critical because they were right in the assembly line of the sausage factory and they saw how bad the meat was. They told them, but no one on the sell side wanted to hear it. Wall Street and the raters both knew and they didn’t disclose it. And all of us are paying the consequences now.

Good for Morgenson and Nasiripour for reporting on this new info, which shows the crookedness in a new light. Boo to the rest of the press for not.

Get to it.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.