Goldman hosed Basis for $100 million of Timberwolf, sent margin calls two weeks after that, and in two more weeks the fund was bankrupt.

The shadiness goes back further than 2007, of course. Wall Street provided the financing that was the lifeblood of predatory lenders like Ameriquest and Countrywide. In many cases, Wall Street was the predatory lender. Giant banks like Washington Mutual and Lehman Brothers cut out the middlemen, becoming one-stop shops of toxic slop. It’s hard to argue in the face of evidence from the likes of Clayton Holdings, that Wall Street didn’t know it was defrauding investors by repackaging fraudulent loans.

And Lehman, for one, had done it all before, in the 1990s:

The vice president, Eric Hibbert, wrote a memo describing First Alliance as a financial “sweat shop” specializing in “high pressure sales for people who are in a weak state.” At First Alliance, he said, employees leave their “ethics at the door.”

The big Wall Street investment bank decided First Alliance wasn’t breaking any laws. Lehman went on to lend the mortgage company roughly $500 million and helped sell more than $700 million in bonds backed by First Alliance customers’ loans. But First Alliance later collapsed. Lehman landed in court, where a federal jury found the firm helped First Alliance defraud customers.

But wait a minute: Why does this need to be explained to leading financial journalists?

Beyond all that, there’s another core problem that Lowenstein doesn’t take into account: When you have a system set up by and for people getting paid millions or tens of millions of dollars a year and that system goes catastrophically awry and destroys the lives of millions of people while costing taxpayers trillions of dollars—and the people who set it up and failed continue to be paid millions or tens of millions of dollars a year (which Lowenstein has, to his credit, railed against), the desire for scalps is going to be high. People want the folks on Wall Street to pay a price for their recklessness. We sense, and reporting has shown, that in an orgy of greed like the one we saw from 2005 to 2007, that lots of crimes were committed, particularly as the music stopped.

So recklessness and “unconscionable risk-taking” might not be illegal, and most of the actions taken by those in positions of power may have been technically legal, but that doesn’t mean finding other ways to penalize them for the unethical actions is a bad idea. We sent Al Capone away for tax evasion, after all. Why is it a bad thing if Dick Fuld gets shackled for something like Repo 105?

I’ll leave the last word to Andrew Ross Sorkin, of all people, who wrote this in December:

If the government spent half the time trying to ferret out fraud at major companies that it does tracking pump-and-dump schemes, we might have been able to stop the financial crisis, or at least we’d have a fighting chance at stopping the next one.

Now that’s courageous, at least for a financial journalist.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at