Who is mostly to blame for the biggest upheaval on Wall Street since the Great Crash? The disaster appears to have many fathers. "In a way, it's the perfect crime: Who do you go after?" asks Jim Rokakis, the treasurer of Cuyahoga County in Ohio, one of a slew of state-level officials who saw the mess coming years ago but were ignored by the Feds. "If you arrest the mortgage brokers, how can you in good conscience not arrest the officers of the mortgage banks and the rating agencies?" Rokakis wonders. Ultimately, a big share of the blame lies with Wall Street CEOs who encouraged all this bad lending by packaging it into ever more complex securities, and then invested in it themselves by the billions. Indeed, the myth surrounding the subprime fallout is that no single player along the pipeline could have prevented what happened, including the giant investment banks that loaded their balance sheets with this dreck only to have it drag them into oblivion. "Everyone's to blame, and no one's to blame," says financial expert Joseph Mason of Drexel University, summing up a common view of academia and in Washington.

I don't buy it. Especially the idea that somehow the blame lies mainly with Wall Street's greed, as John McCain reiterated the other day, saying we have to "fix" it. How do you fix greed? And let's face it, left to its own devices, Wall Street has always operated on pure adrenalized greed, which is why financial manias and bubbles come and go and always will.

This mess is mostly a titanic failure of regulation. And the largest share of blame goes back to one man: Alan Greenspan. People mainly fault the former Fed chief, who once enjoyed a near-saintly reputation because of his reputed "feel" for market conditions, for ushering in an era of easy credit that accelerated the mortgage mania. But the much bigger problem was Greenspan's Ayn Randian passion for regulatory minimalism. Under the Home Ownership and Equity Protection Act enacted by Congress in 1994, the Fed was given the authority to oversee mortgage loans. But Greenspan kept putting off writing any rules. As late as April 2005, when things were seriously beginning to go wrong, he was saying that subprime lending would work out for the common good—without government interference. "Lenders are now able to quite efficiently judge the risk posed by individual applicants," he declared at the time. So much for his feel. New regs didn't get put into place until this past July—long after the crash had come, under Greenspan's successor, Ben Bernanke. The new Fed chief's "Regulation Z" finally created some common-sense rules, such as forbidding loans without sufficient documentation to show if a person has the ability to repay.

Greenspan has tried to defend himself repeatedly, though as bank after bank has failed he's retreated to the shadows. But in a 2007 interview with CBS he admitted: "While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late." This, from a man who once told me, in an interview, that he most enjoyed scanning economic reports for hours in his bathtub. Now, with Tuesday's $85 billion bailout of AIG adding to the hundreds of billions the government has already put up to rescue Bear Stearns, Fannie Mae and Freddie Mac, this apostle of free-market absolutism has realized his worst nightmare. He has given us the largest government intervention into the markets since FDR. Heckuva job, Greenie.

To be sure, there were other regulators who failed. The federal Office of the Comptroller of the Currency and Office of Thrift Supervision in 2002 pre-empted all states from regulating banks and thrifts. The regulator of Fannie Mae and Freddie Mac had almost no power at all. In addition, Fannie and Freddie are both funded by Wall Street, just as the OCC and OTS get their funding from industry fees. That created conflicts of interest: the "government-sponsored entities," as Fannie and Freddie were known, and the regulators of banks and thrifts were vested in boosting the profits that kept them going. "At the national level, the view prevailed that diversifying risk is a good thing, and markets can solve most problems," says Kathleen Engel, a finance expert at Cleveland State. "Advocates in the states were saying the markets weren't, but the federal agencies just sat on it." These regulators also encouraged the industry they so loosely oversaw to send battalions of lobbyists into state capitals to gut regulation at that level, as well. Tom Miller, the Iowa attorney general who successfully sued Ameriquest over irresponsible lending practices nationwide, told me over the summer that the OCC's director spent so much of his energy on turf battles—fighting state efforts to regulate—that he barely paid attention to what the banks were doing in subprime securitization. "He kept saying the states are too strong in regulation, and telling the banks, 'We're not going to be as tough on you'." OCC spokesman Robert Garsson defends his boss, saying that "almost everybody agrees that predatory lending is not a problem in the national banking industry." Now, that may be true. Still, any banks bought plenty of the securities that predatory lenders were helping to create.