No lawyer is entitled to walk with as much of a swagger as Baker Hostetler’s Irving Picard, the man charged with suing the wealthy and poor alike to recapture the monies lost to Bernie Madoff’s Ponzi scheme.  He and his team of thousands of hourly charging lawyers seemed omnipotent, unstoppable, in their quest to find funds and claw them back, maybe even leaving loose change for those who suffered in the scheme.

But not even Irv, the most powerful lawyer on earth, is strong enough to beat the banks.  From the New York Times :

He has sued the feeder funds that funneled money into Madoff’s firm. He has sued people who were close to Madoff and likely knew he was a crook. And he has sued many innocent Madoff investors, who had the misfortune of taking more money out of their accounts than they put in. Although these latter lawsuits have been extremely controversial, “clawing back” money from net winners to create a pot of money for the net losers is something bankruptcy trustees do all the time after a Ponzi scheme is exposed. After all, the gains reaped by the net winners came from money the net losers put in. That’s how Ponzi schemes work.

What trustees don’t generally do, however, is sue big financial institutions like HSBC or JPMorgan Chase on the grounds that they either looked the other way or helped enable the Ponzi schemer. As we discovered during the Enron scandal, the courts frown on “aiding and abetting” suits, even though to a nonlawyer, they can seem more than justified.

Curiously, such conduct is more than sufficient to put a man in prison forever, whether for actively helping some schemer get away with it or consciously avoiding knowledge while the schemer does his dastardly deeds.  But those rules that apply to mere mortals do not affect institutions of finance.

[I]n throwing out Picard’s suit against HSBC — and strongly implying that every other bank the trustee has sued is also likely off the hook — Rakoff may have used sharp language, but he was really just interpreting the law as most judges would. You can’t read his opinion without being impressed with his legal logic — and the difficulty of mounting a successful appeal. You also can’t read it without shaking your head in dismay: Even as innocent Madoff victims are being sued to pay back other innocent Madoff victims, the enabling banks get to walk away. Sounds familiar, doesn’t it?

Don’t blame Southern District of New York Judge Jed Rakoff for doing his job, determining whether even a giant like Picard has the juice to square off with the titans of finance; did Picard have standing.

In this case, he said, he was being asked to determine whether Mr. Picard, as the trustee for the defunct Madoff firm, had standing to sue “third parties who allegedly violated a duty to Madoff Securities’ customers by failing to detect Madoff’s fraud.” He said his answer was no.

In a sharply worded dismissal of Mr. Picard’s “convoluted theories,” Judge Rakoff rejected all the various arguments the trustee had put forward.

It was not at issue that the banks, big, powerful banks, had awfully good reason to know they were complicit in Madoff’s scheme, from overlooking its nature to laundering its proceeds.  The question presented was whether the victims could take the banks to task for enabling Madoff all those years.  The legal answer came as no surprise.

Still, don’t feel badly for Irv and his band of merry men for having been dealt such a crushing blow by the banks, without whom Bernie Madoff could never have perpetuated his scheme and sucked in feeder funds and individuals who thought that he had to be legitimate or someone would certainly have known.  They can still round up all the Madoff investors who took their profits and render them destitute.  They can still undermine baseball teams and hedge fund operators.  It’s not that Irv doesn’t have plenty of juice to unravel the fabric of polite society.

It’s that nobody, not even Irving Picard, can hold a bank responsible for anything.

And you thought Chuck Schumer’s lying prostrate on the floor when it came to DataTreasury was unseemly?  Neither law nor politics can surmount the might and control of the banks, because that’s where the money is.  Willie Sutton knew it.  Now Irv Picard knows it. You might as well know it too.