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Looking for a Villain

It’s no surprise that the FBI is investigating four companies at the heart of the financial crisis to find out whether criminal wrongdoing helped lead to their collapse. The failures of Fannie Mae, Freddie Mac, Lehman Bros. and the insurance company AIG shocked Wall Street and, except for Lehman, resulted in bailouts funded by taxpayers.

Whether the probe will turn up anything is unclear. But its launch, along with some of the tough questioning by senators Tuesday over the Treasury Department bailout plan, show that we’re all still looking for something in this crisis. We’re trying to find a villain, a face that represents the wrongdoing. The savings and loan debacle had Charles Keating. Enron had, well, Enron itself, and Jeffrey Skilling. So far banks and lenders that made high-cost loans to vulnerable borrowers are the bad guys, but no one single financier has emerged who sums up all the problems that went on. That makes it harder to simplify the crisis, to frame it by pointing fingers at one individual.

The Wall Street Journal notes today that the complex mortgage-backed securities at the center of the crisis make it hard to distill into a face or a name. From the Journal:

Investigators say that despite calls from some quarters to prosecute wealthy bankers who helped fuel the mortgage bubble, it is unclear what crimes they will find at the root of the exotic financial vehicles that have sickened banks around the world. A more likely outcome of the probes will be hundreds more retail-level fraud cases of the type already being brought against brokers, real-estate agents, and buyers related to falsified mortgage applications.

There is yet to emerge a figure such as banker Charles Keating, who served four years in prison for fraud related to the collapse of American Financial Corp. and whose name became synonymous with the S&L crisis. But already there is widespread anger that mortgage securities deals enriched many on Wall Street at the expense of millions of home buyers and taxpayers nationwide who will end up paying the costs

Wall Street is an abstraction, as Federal Reserve Chairman Ben Bernanke said at the hearing, when pressed about whether it owes the American people an apology. But that doesn’t mean that as the bailout controversy goes on, there won’t be a continuing search for blame, for someone who symbolizes the mess we’re now in.

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