Brother, can you spare some bling?

Paul Krugman, the Princeton economics professor and New York Times columnist, says it's beginning to look a lot like the Great Depression out there. I am not going to argue economics with a Nobel laureate.

ELSEWHERE in the Times, Michael Lewis and David Einhorn explain that the sad financial straits we're in isn't a matter of bad breaks or a few bad Wall Street bankers, but instead is a matter of national insanity.

Einhorn and Lewis:

Incredibly, intelligent people the world over remain willing to lend us money and even listen to our advice; they appear not to have realized the full extent of our madness. We have at least a brief chance to cure ourselves. But first we need to ask: of what?

To that end consider the strange story of Harry Markopolos. Mr. Markopolos is the former investment officer with Rampart Investment Management in Boston who, for nine years, tried to explain to the Securities and Exchange Commission that Bernard L. Madoff couldn’t be anything other than a fraud. Mr. Madoff’s investment performance, given his stated strategy, was not merely improbable but mathematically impossible. And so, Mr. Markopolos reasoned, Bernard Madoff must be doing something other than what he said he was doing.

In his devastatingly persuasive 17-page letter to the S.E.C., Mr. Markopolos saw two possible scenarios. In the “Unlikely” scenario: Mr. Madoff, who acted as a broker as well as an investor, was “front-running” his brokerage customers. A customer might submit an order to Madoff Securities to buy shares in I.B.M. at a certain price, for example, and Madoff Securities instantly would buy I.B.M. shares for its own portfolio ahead of the customer order. If I.B.M.’s shares rose, Mr. Madoff kept them; if they fell he fobbed them off onto the poor customer.

In the “Highly Likely” scenario, wrote Mr. Markopolos, “Madoff Securities is the world’s largest Ponzi Scheme.” Which, as we now know, it was.

Harry Markopolos sent his report to the S.E.C. on Nov. 7, 2005 — more than three years before Mr. Madoff was finally exposed — but he had been trying to explain the fraud to them since 1999. He had no direct financial interest in exposing Mr. Madoff — he wasn’t an unhappy investor or a disgruntled employee. There was no way to short shares in Madoff Securities, and so Mr. Markopolos could not have made money directly from Mr. Madoff’s failure. To judge from his letter, Harry Markopolos anticipated mainly downsides for himself: he declined to put his name on it for fear of what might happen to him and his family if anyone found out he had written it. And yet the S.E.C.’s cursory investigation of Mr. Madoff pronounced him free of fraud.

What’s interesting about the Madoff scandal, in retrospect, is how little interest anyone inside the financial system had in exposing it. It wasn’t just Harry Markopolos who smelled a rat. As Mr. Markopolos explained in his letter, Goldman Sachs was refusing to do business with Mr. Madoff; many others doubted Mr. Madoff’s profits or assumed he was front-running his customers and steered clear of him. Between the lines, Mr. Markopolos hinted that even some of Mr. Madoff’s investors may have suspected that they were the beneficiaries of a scam. After all, it wasn’t all that hard to see that the profits were too good to be true. Some of Mr. Madoff’s investors may have reasoned that the worst that could happen to them, if the authorities put a stop to the front-running, was that a good thing would come to an end.

The Madoff scandal echoes a deeper absence inside our financial system, which has been undermined not merely by bad behavior but by the lack of checks and balances to discourage it. “Greed” doesn’t cut it as a satisfying explanation for the current financial crisis. Greed was necessary but insufficient; in any case, we are as likely to eliminate greed from our national character as we are lust and envy. The fixable problem isn’t the greed of the few but the misaligned interests of the many.

(snip)

Our financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.

THUS DO AMERICANS great and small, and thus have they done ever since Gordon Gekko told us "Greed is good," and the Reagan Administration governed as if it were so. Today is the enemy of tomorrow, and our wants have become the mortal enemy of our needs.

We Americans live as if we can separate faith and life -- or lack of faith and life, for that matter. It doesn't work out. God won't stay in a box, only to be taken out for an hour on Sundays -- if then. There are consequences when we try to do that, both individually and collectively.

Likewise, Satan won't stay in a box either, content to come out only when we want to have a little naughty fun. You don't have to give the devil his due; he'll just take it.

Among other things.

WHAT HAS BEEN playing out on Wall Street, in Detroit . . . and on Main Street, too, resembles nothing so much as it does a cleaned-up version of ghetto nihilism. You know, the kind of life your kids like to hear glorified by the likes of Lil' Wayne, T-Pain and 50-Cent.

Er, Fiddycent.

If you have no hope of long-term reward for right behavior, no faith in a better day to come, see no prospect of something -- Someone -- greater than yourself caring for even the humblest of creatures and someday setting what is wrong aright, why not go for the bling, the blow and the booty? Or, in polite "society", the immediate return writ large, the second home in the Hamptons and "friends with benefits."

Or a high-priced "escort." Whatever.

ONE PATHOLOGY widespread among the "underclass" is an inability -- often so ingrained as to be a cultural trait -- to act in its own long-term interest through self-restraint and delayed gratification. Today, nothing so defines the culture of Wall Street, and of Main Street, so much as this same pathology.

How else do we explain McMansions, investment banks with 30 times more debt than assets, three cars in the garage and subprime mortgages?

Today's headlines tell us of a financial crisis. The systemic and cultural dysfunction behind the financial crisis, however, speaks to a longtime -- and ongoing -- spiritual depression. Our society struggles with a deficit of faith, while deflationary pressures deplete its reservoirs of hope.

WE'VE EATEN. We've drunk. We thought we were merry. Was it all because the only prospect we saw for tomorrow was "die"?