06/27/2010 07:31 pm ET Updated May 25, 2011

People Didn't Drown The Markets; A Bad System Did

The temptation is to see the 2008 Wall Street implosion that helped trigger the broader economic crisis as the consequence of individual idiocy and avarice. That thesis is emotionally appealing -- nowadays everyone loves to hate and, better still, feel superior to wealthy Masters of the Universe. It is intellectually appealing, too. Blaming the crisis on human error is a lot easier than trying to work out the systemic problems it laid bare.

But just because something is easy doesn't make it accurate. Call it the Michael Lewis fallacy. His book The Big Short deserves its place on the best-seller lists; it offers the best insight yet into the lunacy of subprime borrowing and the intricate world of structured financial products used to bet on those dreadful home loans. But the fabulous human stories of greed and stupidity Lewis tells are a seductively dangerous basis for understanding the global economic meltdown.

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