By Patrick Rucker

WASHINGTON, Oct 26 (Reuters) - Wall Street executives are too shielded from prosecution and should answer for misdeeds committed by underlings, the watchdog for a multibillion-dollar bailout said on Wednesday.

Senior banking officials should attest each year that their companies are free of criminal fraud and civil abuse, said Christy Goldsmith Romero, special inspector general of the Troubled Asset Relief Program.

"Every executive should be able to conduct due diligence," she told Reuters in an interview. "If they are too big to do that, then they are too big, period."

In 2008, Congress created TARP to buttress a financial system crippled by crashes in the housing and stock markets. U.S. taxpayers have invested more than $400 billion since the crisis, mostly in large Wall Street banks.

Goldsmith Romero leads a staff of roughly 140 investigators examining possible abuse of the TARP program. Since it was conceived, the inspector general's office has helped recover more than $10 billion in misappropriated money.

Every three months, Goldsmith Romero's office reports to Congress on her agency's work. The 550-page report filed on Wednesday details tens of thousands of cash injections, selloffs and other investments of taxpayer money.

Goldsmith Romero said the report also described cases where executives are complicit in fraud but the highest-ranking officials are walled off.

"The knowledge stops," she said. "It resides at lower levels and stops there. And in many cases, I think that's by intentional design."

Goldsmith Romero has never before suggested a reform of the financial system. She said that she felt compelled to speak up this time after facing so many cases where senior executives seemed out of reach from prosecutions.

"This is one way to argue for change," she said.

(Reporting by Patrick Rucker; Editing by Lisa Von Ahn) ((patrick.rucker@thomsonreuters.com; +202 354 5858; Reuters Messaging: patrick.rucker.reuters.com@reuters.net))