The New York Times devotes its column one on A1 to a look at how the Justice Department has effectively gotten out of the corporate-prosecution game, relying instead on something called “deferred prosecutions” to slap the wrists of wrongdoers.

In a major shift of policy, the Justice Department, once known for taking down giant corporations, including the accounting firm Arthur Andersen, has put off prosecuting more than 50 companies suspected of wrongdoing over the last three years.

Instead, many companies, from boutique outfits to immense corporations like American Express, have avoided the cost and stigma of defending themselves against criminal charges with a so-called deferred prosecution agreement, which allows the government to collect fines and appoint an outside monitor to impose internal reforms without going through a trial. In many cases, the name of the monitor and the details of the agreement are kept secret.

Deferred prosecutions have become a favorite tool of the Bush administration (former AG John Ashcroft’s firm has gotten more than $50 million to be an outside corporate cop for one company). But some legal experts now wonder if the policy shift has led companies, in particular financial institutions now under investigation for their roles in the subprime mortgage debacle, to test the limits of corporate anti-fraud laws.

Defenders of deferred prosecutions say they minimize the “collateral damage” that would result from convicting an entire company, as happened when it indicted accounting rogue Arthur Andersen for its crimes on behalf of Enron and 28,000 people lost their jobs.

The Times says most of the agreements end with charges dismissed within three years. It reports speculation about how Justice might apply them to “investigations against financial companies in the mortgage lending scandal,” and quotes Neil Power, the head of the FBI’s economics-crime unit sounding like a bug-eyed lefty raging at the corporate machine. This is a high-ranking Bush administration official, mind you, and thus gets our Mr. Power, Prepare Your Resume Quote of the Day:

Mr. Power said the investigations were a reflection of the “environment of greed” that allowed companies to package mortgages into securities they sold to investors without sufficient documentation of the borrower’s ability to repay. One line of criminal inquiry focuses on whether bond companies gave accurate information to investors.

“What we’re looking at,” he said, “is the fact that they may be performing accounting fraud.”

Small-biz SOS

In economic news, an index of small-business sentiment plunged to its lowest level twenty-eight years. The WSJ puts the news on A6 and third in its A1 Business & Finance column, and Bloomberg says “companies are cutting back as sales and profits deteriorate, signaling the economic slump may worsen” and that “the slowdown may not help alleviate inflation as more respondents planned to boost prices to cover rising costs.”

USA Today:

Many small firms reported getting hurt by weaker sales, inflation and higher energy costs. Small businesses that reported weaker earnings outnumbered those with earnings gains by 33%. The survey found “no evidence” of NFIB members ailing from credit and cash-flow problems arising from the housing slump and tighter bank lending. “It is a Wall Street issue,” the survey states.

Pending home sales dropped twenty-one percent in February from a year ago and 1.9 percent from the month before, surprising economists who had predicted a small rebound.

A federal energy agency sharply raised its estimate for the average price of oil this year to $101 a barrel from $84 three months ago. The WSJ says the agency is “usually a price bear.”

Can the Fed go broke?

What if the Federal Reserve runs out of money? That’s what officials are now making contingency plans for in case the credit crisis fails to let up in the next few months, The Wall Street Journal reports in an A3 scoop.

The Fed has lent so much cash to banks and investment banks—about $300 billion of its $790 billion in Treasury bills and bonds—that Wall Street fears the central bank may hit a wall soon, as the values of junk assets it’s accepting as collateral continue to decline.

The Journal notes that the Fed can always effectively print its own money, but that would plunge the federal-funds rate, something it would “contemplate… only in dire circumstances. The Bank of Japan took this step this decade after years of economic stagnation.”

One way the Fed is planning to get around that is by having Treasury issue more debt than it needs to fund the government and deposit that with the Fed. Or the Fed might raise its own debt for the first time ever.

A subprime lawsuit

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 Follow him on Twitter at @ryanchittum.