I wrote this some time ago and never got around to publishing it. I was never quite satisfied with what I wrote and I’m still not, but in light of the Madoff Affair, I decided to throw it on the blog.

Everyone else has had a shot at trying to pin the blame for the mortgage and credit crises on someone so I’m going to take mine.

The last list I read identified 26 culpable parties. My list is really short. Just two guilty groups. Those two forgot that human beings are capable of great things but that left alone they will do whatever is required to accomplish their goals.

For instance, take a football game. Twenty-two men of great size and strength occupy a small area and are told that wealth and glory will accrue to them if they prevail. In the interest of protecting all of them from serious injury, certain rules apply. You can’t brutalize the quarterback if he doesn’t have the ball, you can’t tackle or block in a manner that could cause grievous harm to someone’s legs, you can’t use your opponents face mask to drag him to the ground lest you break his neck and so on. They all know the rules.

Now these twenty-two men walk onto the field and begin their game. After a couple of plays they look around and realize that there are no officials monitoring their behavior. What do they do? Anything it takes to win the game and claim the prize. Bodies fly and bones are broken as the players do what human beings do. Play to win. Some may carp at their opponents or teammates about not abiding by the rules but that soon ends as they realize that defeat is the only outcome of that strategy.

So too it was with the players in the industries that brought us to our current state of affairs. They simply found themselves on a playing field with rules and no one to enforce them. Realtors, mortgage brokers, investment bankers, the whole lot behaved like human beings. It might be nice to think that they would have adhered to established standards but it is probably wishful thinking. It never has worked that way before.

The regulators and their overseers, Congress, simply were missing in action. Either too few were on the job or they were stymied in their attempts to blow their whistles. It wasn’t an issue of a lack of rules rather a lack of enforcement.

And the other group, you ask, who were they that failed so miserably? The boards of directors of the institutions that have come to such dire straits. Supposedly men of intelligence, wisdom and character they failed miserably in their oversight role. How such people could sit by and watch enormous profits accrue to the companies they were charged with monitoring and not have asked,”how are you making this much money” is beyond understanding.

We probably do need a better regulatory scheme but we also need people to regulate as well. A bit less frivolous spending and a bit more money appropriated to human capital might go a long way towards controlling destructive behavior. As for the directors, public humiliation may have to suffice. It is probably not inappropriate for the government to require as a price of the bailout that the boards be reconstituted and that a stern reminder of their duties is delivered to the replacements.

If anything, the crises should remind us that we are imperfect and need to protect ourselves from ourselves. It’s one of those Pogo moments.