A woman gets into her car, and waves at her husband, who is crossing in front of the car. Pressing the pedal to the ground, she puts it into gear . . .  and steams forward at full speed, crushing him against the wall of the garage.

Is she a villain?  It rather depends, doesn't it?

Scenario #1:  she's angry because she found out he had an affair, and decided to kill him "by accident" for the insurance.  Scenario #2:  she thought she was stepping on the brake, and stepped on the gas instead.  The former is a crime, the latter a tragedy.  But you can't divine which simply by knowing that something terrible happened.

So I confess I'm slightly puzzled that Barry Ritholtz is puzzled by my assertion that "financial crises don't offer villains":

I don't really get Megan McArdle when she makes a statement such as the one above. It was in an article critiquing Matt Taibbi and defending Goldman Sachs.

Um, Megan, I am going to have to beg to differ with you. There were many, many identifiable villains who through their own action and inaction, helped create the crisis. There were people who remained slavishly  devoted to an outmoded and disproven ideology, which led them to decisions that were indefendable. Some people engaged in utter recklessness when it came to risk management, or such gross irresponsibility that they are not merely morally culpable, but legally also. Then there are those regulators who gave the corporate interests they supervised pretty much everything they asked for.  And of course, the people simply trying to grab a free lunch contributed mightily to the collapse.

Ritholtz is not, in many of these cases, describing villainy.  He is describing "being wrong", which is not a crime, thank God.  Villainy involves people who know, or should have known, that what they were doing was likely to lead to the awful results.

I mean, you can quibble and say "You should have known that that was the gas pedal", and indeed you should have, but if, for whatever reason, your senses deluded you, you're not a villain.  No, even if you were thinking about the presentation you had due at work--or how angry you were at your husband for having a fling with his secreatary--rather than concentrating on your driving.

When something is common enough, I think it definitionally isn't villanous.  It may be a practice that should be fixed--we should all be more careful when starting our cars, I'm sure.  But most of us have, at some point in our lives, accidentally stepped on the gas instead of the brake.  And in the overwhelming majority of cases, this is not a huge problem, or even a problem at all--we run into the curbstone, or roar out of the driveway a little too fast.  We don't punish people merely because, through a fluke of circumstance, the one time THEY did it happened to be fatal.  Or at least, we shouldn't.

Because of course when very bad things, like Great Depressions, happen, we do indeed go looking to prove that people who did the wrong thing at the wrong time must have been awful, awful people. 

I have no reason to love Goldman Sachs, and I don't.  I didn't like them when I was interviewing for investment banking internships in business school (worst interviews by far were sponsored by Goldman Sachs and Bear Stearns).  I dislike the way their alums, and indeed, their current employees, have permeated our politics and our financial regulatory system like some sort of insidious fungus.  I have been repelled by Jon Corzine ever since he spoke at my business school graduation ceremony, where he jovially described how he had cheated his way into a diploma by getting his girlfriend to do his final project for him.  He seemed to think this was funny.

I am excessively unpleased with the way the banks in general, and Goldman Sachs in particular, are not even a little bit contrite about the fact that the American taxpayer had to bail them out of a gigantic mess they helped create.  They have not returned any of the squintillions they made off creating the crisis, offered a heartfelt apology, or even sent flowers and a faux-sincere note.  And the salaries they are preparing to pay themselves this quarter by way of celebrating the fact that they didn't actually succeed in reducing a once great nation to barter?  I can't even think about them because I am afflicted with borderline hypertension, and do not wish to start medication before I have to.

But while it is irksome that bankers thought they were geniuses who had somehow magically made risk disappear, while it is vexing that they made so much money taking so many systemic risks, none of these things are actually illegal.  And while their arrogance and greed were certainly a necessary precondition of the crisis, they were not in any way sufficient.   They needed cooperation from moronic Asian savers who lent them the money, regulators who thought--just as the bankers did--that they'd gotten too smart to have a financial crisis--and homeowners who had come to view homeownership as a way to get rich without working.  Everyone who said "renting is throwing your money away" is a guilty party in this.  And that's . . . almost everyone. 

I'm well aware that if my financial and romantic situation had been different in 2005 or 2006, I might well have bought a house that would now be in deep trouble, because, well, everyone's doing it, and things that everyone's doing seem inherently safe.  Which is why no one parent can let their kid wait at the bus stop alone, but they can all collectively allow the little tykes to take up rock climbing, or get behind the wheel of a car when they turn fifteen.

Once you have tens of thousands . . . or tens of millions . . . of people in the dock, you don't have villains.  You have a system that has gone badly wrong.

Oh, the crisis has produced villains, or rather, exposed them.  Bernie Madoff, Allen Stanford, et al are genuine human sewage as far as I can tell.  But the crisis would have gone on just the same without Bernie Madoff, and Bernie Madoff would have gone on just the same without the housing bubble.  At any given time, there is a certain amount of garden variety financial fraud going on.  It tends to emerge in financial crisis not because they're actually connected, but because falling asset values expose the con.

There are plenty of villains around, but no group small enough to be assigned any meaningful measure of responsibility for the financial crisis.  Imagine that Goldman Sachs had, say, gone under in the 1998 financial crisis.  Imagine that Clinton or Bush had appointed someone else to the SEC from the universe of politically possible candidates.  Imagine that Suze Orman had started talking down homeownership in 2003 rather than touting it as a fabulous way to build your net worth.  What would be different now?  Nothing of any importance, as far as I can tell. 

You can point to many people--thousands of bankers, tens of thousands of realtors and mortgage brokers, millions of homebuyers--who did things I really wish they hadn't, blinded by greed and wishful thinking and arrogance.  But when the action of any one person, or firm, requires millions of counterparties taking their own stupid risks, I don't see how you can really name them the villains of the piece.

This will not, of course, please anyone who wants me to tell them how and why we should get the bankers.  For them, the important thing is the conclusion; since we already know it, it is a trivial matter to assemble whatever evidence might help us get the bankers.    And since I am not providing them with convenient reasons to get the bankers, it therefore follows that I must be a paid hack protecting my corporate masters. 

Me, I think it's possible that we should get the bankers, and I'd certainly like to get the bankers out of government, though I'm not sure how you find out what is going on in the banking system without, like, asking some bankers.  But I think the case needs to be a leetle bit tighter than the fact that bankers make stupid decisions, bankers get paid a lot, and we just had a financial crisis.  I'd like to see someone make the case that they did things that were actively, knowingly, illegal and morally turpitudinous, rather than simply totally moronic.  Because with the total moron thing, they had an awful lot of company.