The narrow frame is set here (with my emphasis):

To be clear, we’re not talking here about sensational, not conceivably legal, out-and-out Ponzi schemes, like the $50 billion one that former Nasdaq chairman Bernard L. Madoff has been arrested for, or brazen forgery and criminal impersonation, like the $100 million spree that glitzy New York litigator Marc S . Dreier has been accused of. Crimes like those typically have only one of two defenses: (a) “It wasn’t me,” or (b) “Okay, it was me, but I was sleepwalking on Ambien at the time.” The probes being discussed here concern statements that ultimately proved incorrect, but which reasonable, straight-faced people can, and vigorously do, contend were honest when made.

I’d note here that this passage sets up a straw man. Outright embezzlement vs. highly fraught discussions with investors during times of great stress and peril. Again, this last is a narrow band of activity in what was a sprawling crisis that encompassed mortgage brokers in strip malls, lenders from Orange County to New York, bond salesmen and their bosses on Wall Street, advisors, due diligence firms, accountants, consultants, raters, intermediaries, you name it.

The story goes on to discuss the potential criminal liability that might attach to statements made by Bear Stearns’s Alan Schwartz, Lehman Brothers’s Dick Fuld, AIG’s Joseph Cassano, Fannie Mae and Freddy Mac executives, and so on.

And quite reasonably, I think, the piece describes the difficulties in making a case that the executives deliberately lied to investors, rather simply put the best face on ambiguous situations in an attempt to protect shareholder interests.

Here’s the bit about Cassano:

In August 2007, a month after those agencies downgraded hundreds of CDOs, Cassano spoke to investors in a conference call. “It is hard for us, without being flippant,” he said, “to even see a scenario … within any kind of realm of reason that would see us losing $1 in any of these transactions.”
In a sense, Cassano’s prognostication was not as far off as one would think. Even today very few CDO tranches insured by AIG FP have actually stopped paying as anticipated. But what Cassano and AIG were not disclosing - and at that stage might not themselves have appreciated - was that if market confidence in the CDOs fell sufficiently, AIG could be forced to post billions of dollars in cash collateral to protect the counterparties to its credit default swaps. It would also face writedowns in the value of its credit default swap portfolio, causing huge quarterly losses, sending the company’s stock price lower, threatening its own credit rating, and making it harder for the company to raise new capital. Thus, even without cash losses, the unit’s portfolio could start the company on a downward spiral to oblivion.

The piece as a whole reads more or less like that.

Again, there isn’t a word in the piece that is wrong, but it is crafted in such a way that it ignores the main victims of the credit crisis: borrowers and bond investors.

One category, for instance, dismissed by Fortune, but which is the subject of multiple federal criminal investigation, is alleged fraud by lenders, on a mass scale, against borrowers. We’re not talking about gray-area behavior, like teaser rates and liar’s loans, but plain vanilla fraud: forgery and other tampering with documents, verbal and written misrepresentation, slipping in changes in basic loan terms at the time of closing, and so on.

Evidence of institutionalized corruption at now defunct lenders is by now overwhelming, as I tried to illustrate in a piece in CJR’s September/October print edition.

Here’s an excerpt:

The mortgage mania appears to have entered its Baroque phase sometime around 2004. That year, Countrywide approved a brokerage known as One Source Mortgage, Inc., owned by five-time felon Charles Mangold, which proceeded to embark on “rampant” fraud, Illinois says, including the wholesale doctoring of loan files.

Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014).

Follow Dean on Twitter: @deanstarkman.