Well, since that post was written, we've found out about a potential $50 billion fraud at Bernard Madoff, a mere $100 million alleged fraud by Marc Dreier, and some dude in Miami who was rewriting the value of mortgages to make the associated securities more valuable. And that's just in 2 weeks with the limited resources that the FBI and SEC have to find this stuff relative to the total scale of what was going on.
Various things went wrong to produce the current financial shambles. But one of them was an "if it feels good, don't stop it" regulatory ethos that came straight from the top of government. That ethos attracts particular kinds of people.
This is convenient, since I was about to write a follow-up post on the same topic. The recession is uncovering a lot of shenanigans, as recessions usually do.
Nonetheless, I beg to differ about his interpretation. First of all, all of these things, while nasty, are sideshows; the economy would have fallen exactly as far and fast without them. P. O'Neill is confusing correlation with causation. The normal amount of fraud that pervades society is easier to uncover when bubbles collapse and con men are left short. The more interesting sort of fraud, which we may or may not find, will come out of the big banks and Frannie Mac.
Second of all, all of the stuff detailed in this post is very, very illegal. It isn't something that regulators nod and wink at. It isn't the kind of thing that Bush directed his SEC to go easy on. No one, at any time, in any regulatory agency, changed their opinion about the virtues of counterfeiting securities and impersonating pension officials.