Nearly a decade since the housing bubble burst the dirty skeletons still emerge from the closet, and still nobody goes to jail.

In the latest example of how criminal Wall Street behavior leads to zero prison time and just more slaps on the wrist, overnight Warren Buffett's favorite bank, Wells Fargo (WFC), admitted to “deceiving” the U.S. government into insuring thousands of risky mortgages. Its “punishment” – a $1.2 billion settlement of a U.S. Department of Justice lawsuit, the highest ever levied in a housing-related matter.

The settlement with Wells Fargo, the largest U.S. mortgage lender and third-largest U.S. bank by assets, was filed on Friday in Manhattan federal court. It also resolves claims against Kurt Lofrano, a former Wells Fargo vice president.

According to the settlement, Wells Fargo “admits, acknowledges, and accepts responsibility” for having from 2001 to 2008 falsely certified that many of its home loans qualified for Federal Housing Administration insurance.

According to Reuters, the San Francisco-based lender also admitted to having from 2002 to 2010 failed to file timely reports on several thousand loans that had material defects or were badly underwritten, a process that Lofrano was responsible for supervising.

According to the Justice Department, the shortfalls led to substantial losses for taxpayers when the FHA was forced to pay insurance claims as defective loans soured.

Wells Fargo is the latest bank in a long series of settlements which absolve banks of all their past bubble transgressions: numerous other lenders, including Bank of America Corp (BAC), Citigroup Inc (C), Deutsche Bank AG (DB) and JPMorgan Chase & Co (JPM), previously settled similar federal lawsuits.

Wells Fargo, however, held out – perhaps due to concerns how such a settlement would impact its core mortgage origination business (recall it is the biggest mortgage lender in the US) – until yesterday. Its payment is the largest in FHA history over loan origination violations.