11/30/2010 06:05 pm ET | Updated May 25, 2011

Transactions: Nov. 29, 2010

Morality is as simple as day and night, light and dark, good and evil. You may not be able to offer up a universal definition of morality, but it's obvious. I'll give it to you straight as a ruler: There oughta be a law -- no, laws. These laws, in turn, should reflect the moral norms of the community. These norms are as straightforward as the Ten Commandments, selected passages from the Torah, choice tidbits from the Koran, outtakes from the Playboy Philosophy. We all know what we're talking about here. Where there are victims there must be criminals. If there are no obvious criminals, we must find them; if there are criminals, but no laws, then we must pass laws to fit the criminals. The community demands an explanation for things that go haywire. One community norm is that it's a legal transgression to defy the will of the community. Don't try to confuse the issue with excuses and sophistry. The community requires closure, catharsis, resolution, satisfaction. The community cannot regain its health until perpetrators are run to ground, preferably by yapping dogs; that will be a sign that we have identified the problem and dealt with it. Trust is restored; nothing is more important than trust. The community itself is never complicit in wrongdoing, which is why we hide prisons in unpopulated areas.

So we had this financial crisis, beginning with subprime mortgages and spreading like wood rot. Recession struck, unemployment spiked, millions suffered. Who perpetrated this? Theories are legion. Bankers. Lawyers. Mortgage peddlers. Traders. Regulators. Pols. Policymakers. Home owners. Housewives. Chinese. Are they equally at fault? Hardly. Indeed, in that diverse pool, illegalities from bubble or bust undoubtedly lurk; the Federal Deposit Insurance Corp. says it is investigating 50 failed banks for wrongdoing. But short of the kind of Madoffian crime Sherlock Holmes would have recognized, much about the crisis is unique to markets and to modern, technologically rich, networked, Beelzebubbian finance. We have had foreshadowings of this. How do you tell an illegal, self-aggrandizing crime from an intellectual, ideological or operational error? One answer, offered by Eliot Spitzer in his sheriff days, is conflict. If you are conflicted -- that is, if you serve multiple constituents, including yourself -- you may be a criminal if you make a wrong call. Your heart will betray you, usually in e-mails. In the Spitzerian view, conflict is corruption, which in theory (he never took this to court, probably because he'd lose) is a crime. The notion that one could be "wrong" or, more ambiguously, wrong and expedient, doesn't matter.

Spitzer's view of these matters is easily updatable. The intellectual error that he derided as excuse making has become what Warren Buffett, in a New York Times op-ed, called "a mass delusion." If you believe that this was truly a mass delusion, as Warren does, or a compounding series of intellectual errors hopped-up by comp and competition, how do you effectively prosecute those mistakes? How do you separate guilt from innocence if the delusion or error was widely shared? The answer: Find those who profited most, those who attained the greatest power or mastery, and send them into the swamp five minutes before the slobbering dogs. This, in turn, suggests that far-seeing fat cats were not deluded at all, that they were aware of what was happening and drove the bus over the cliff deliberately (believing -- see, smart! -- that Uncle Sam, leviathan, would pluck them from midair and save them). In this popular legal theory, the notion of a bubble-as-delusion doesn't fly. Bubbles are veils for conspiracies, which must be ripped away for the community's well-being. Victims are merely evidence of criminality.

And so criminality becomes a matter of psychological, even economic, healing. The language of therapy shapes our notion of the law, which in turn becomes an instrument of moral hazard: We must punish someone to attain that mythical land of closure and prevention. But say bubbles do exist and really can induce error, not only to subprime mortgage holders but to enablers like Alan Greenspan or to Wall Street magnates like Lloyd Blankfein or Jamie Dimon. What if they all missed, or discounted, what was really unfolding, like tipsy revelers in Pompeii a few days before Vesuvius blew? What if, in fact, a bubble is as much a natural phenomenon as a man-made event? (In truth, it's both: It's a market phenomenon, in which individuals act freely but as part of something larger and extra-human.) In that case, baying after some suits to achieve catharsis is a kind of escape from responsibility. If we walk away from this and believe it was simply a matter of a few miscreants, then we have made yet another mistake to achieve a false sense of security. Who will we blame then?

Robert Teitelman is editor in chief of The Deal.