The New York Times reports today that officials are gearing up for a flood of prosecutions against the mortgage fraud that we at The Audit have long believed was a major factor in creating the crisis.

All we can say is: What took you so long?

Across the country, attorneys general have already begun indicting dozens of loan processors, mortgage brokers and bank officers. Last week alone, there were guilty pleas in Minnesota, Delaware, North Carolina and Connecticut and sentences in Florida and Vermont — all stemming from home loan scams.

Defense lawyers are salivating at the prospect of millions of dollars in fresh fees (though later one pleads sympathy for broke Wall Streeters):

“It’s going to be open season,” says Daniel M. Petrocelli, a lawyer whose clients include Jeffrey K. Skilling, the former chief executive of Enron. “You’ll see a lot of indictments down the road, and you’ll see a lot of prosecutions that rely on vague theories of ‘deprivation of honest services.’ “

The Times notes problems in prosecuting high-level financial crime:

The question behind any cases brought against Wall Street will boil down to this: Was the worst economic crisis in decades caused by law-breaking or some terrible, but noncriminal, mix of greed, naïveté and blunders?

There’s only one way to tell: Let the discovery begin.

Here’s what will be the main defense:

That nearly all of the banking industry acted the same, possibly reckless, way could actually help any executive who lands in court, lawyers said. The herdlike behavior suggested that bankers were competing for business using widely shared assumptions, rather than trying to get away with a crime. It would be hard to prove that anyone broke the rules, these lawyers said, since regulations in the riskiest parts of the mortgage industry were so lax.

But you can’t tell me that these guys (whether mortgage-company executives or Wall Street guys that created CDO’s with their detritus) didn’t know that the junk they were making was exactly that. I covered commercial real estate during that time and it was an article of faith for years that the housing-mortgage market was out of control. Mortgage executives and Wall Street bundlers had to know this.

Here’s another potential line of defense:

One defense lawyer said he expected to argue that either his clients did not understand the financial instruments they were marketing, or were not warned of the dangers by underlings.

Good luck with that one!

For all you anti-anonymity absolutists out there, this quote is an example of why they’re sometimes needed:

“We’ll all sing the stupidity song,” said the lawyer, who said he feared that speaking publicly by name would deter potential clients. “We’ll all sing the ‘These guys never told me’ song.“

You’d never get that insight from inside the process without granting anonymity.

The problem with this story is I can’t quite figure out who the Times is talking about. Are we talking about the government prosecuting mortgage fraud or are we talking about it going after Wall Street folks who packaged the stuff and sold it off—or both? The Times keeps referring to prosecuting mortgage fraud while also talking about prosecuting Wall Street executives. Wall Street did lots of stuff wrong. That’s clear.

What’s not clear from this piece in part because the Times seems to make a fairly common mistake here using the term “Wall Street” to refer to corporations that have nothing to do with Wall Street besides having their stocks listed there. “Wall Street” should refer to financial companies like investment banks, brokerages, etc, not mortgage companies in Orange County (though companies like Bear and Lehman and Citi did own subprime shops).

It seems like the possibilities for what it’s talking about are frauds at mortgage companies directly related to borrowers; Wall Street being aware and abetting it, and Wall Street being aware that the CDOs they were selling were toxic.

This story is a bit all over the map, but its heart is in the right place.

Let the games begin.

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.