Paul Krugman asks a basic question. While everyone is tutt-tutting about Bernard Madoff's amazing fraud (how come the SEC never saw it even though it had been denounced as a Ponzi scheme in 1999? How come knowledgeable investors fell for it? etc etc etc) isn't Madoff not really just a symptom of what is endemic in the US (and perhaps global) finance industry? Madoff was an explicit crook but large sections of the US finance industry as a whole are crooked. They have destroyed value, distorted individual incentives (including those of politicians!) and ruined lives while making those who operate the industry incredibly wealthy.
Spivs invest in worthless mortgage contracts (or ultra-high risk investments) and make millions just before the contracts turn toxic. Doing this yields the practitioners more wealth in a short period than a skilled scientist or engineer can earn in a lifetime. Indeed, American wages generallly have stagnated over the past few decades while the salaries of the spivs and bankers have exploded. Moreover, it is not the equity issues that are of major concern but the sheer illogic of believing that such outcomes have economic rationality.