Richard Kovacevich had a point. Why should his company, Wells Fargo, sign its freedom (and his compensation) away to the U.S. Treasury when, unlike many other banks, it hadn't overloaded itself with risky mortgage-backed securities? The Wells Fargo chairman eventually agreed Monday to Treasury Secretary Hank Paulson's capital injection plan—it was, frankly, an offer he couldn't refuse—but Kovacevich's objections still resonate. Amid the continuing market turmoil, there is a sense that all of us are being asked to assume collective guilt for the large, but still identifiable, group of rogues and villains who got us into this mess. And then we're supposed to just forget about it.

Even the Justice Department seems to have slowed down its probe of mortgage and securities fraud, or at least it has adopted a much lower profile. Last spring FBI Director Robert Mueller was eager to trot out big numbers in the probe—35 task forces were at work, and 19 Wall Street firms were being investigated, the FBI declared. "We're going after people right at the top," a spokesman said. Now there is silence. "We've declined all interview requests with regard to this issue," FBI spokesman Bill Carter said earlier this week. Why? One reason, no doubt, is that the Bush administration is deeply concerned about causing more giant firms and hedge funds to collapse. Their principals have become, in a sense, too big to jail.

This is more than just an academic quibble over justice. Federal Reserve chairman Ben Bernanke alluded to the issue in remarks he made Wednesday to the New York Economic Club. "We have a very big 'too big to fail' problem" now, Bernanke said, involving " too many firms that are systemically critical" to the nation's financial health. And unless we solve that problem, and hold some of the villains of this sordid affair accountable, something like the subprime bubble is more likely to happen again some day, even with a new regulatory regime in place.

To a far greater extent than the public realizes, fraudulently inflated home values, wholly invented incomes and other illegal schemes figured in a huge percentage of subprime loans that were turned into securities during the boom—possibly at least 50 percent nationwide, according to county and state officials as well as real-estate experts interviewed around the country. Some experts, like Anthony Accetta, a former federal prosecutor in New York, contend that many big Wall Street players know far more than they are admitting about the extent of this fraud. For years before the subprime market collapsed, he says, they got in the habit of quietly "swapping" defaulted loans for good ones, for favored investors—and selling securities that are not as good as you say they are is, on its face, securities fraud. "The criminality lies in the fact that the investment bank now knows that a substantial portion of mortgages are going to go south. Putting them into securities without disclosing the high probability of default is aiding and abetting mortgage fraud," says Accetta.

Even so, the Wall Street giants have been so confident of escaping serious liability that even some of the most predatory and seamiest lenders, like Countrywide Mortgage, were quickly bought up by respectable banks like Bank of America. Among those puzzled by that trend was Rep. Barney Frank, head of the House Financial Services Committee, who told me he was stunned that Bank of America would want to venture into such a liability minefield. "I'd be more in favor of Syria buying Countrywide," Frank joked. And now, with the exception of Lehman Brothers, most of these banks feel pretty close to invulnerable with a $250 billion government investment in their preferred stock in the offing. So much so, that some economists, like Brad DeLong of Berkeley, suggest that Wall Street could become like Japan's complacent banking sector. "The worry is that Paulson is in the process of creating a bunch of zombie banks," DeLong says.

Bernanke, on Wednesday, favorably compared the current government response to the failures of intervention in the late '20s and early '30s that led to the Great Depression. As the Fed chairman said, the Hoover administration simply allowed half of the nation's banks to fail, turning a serious recession into the Great Depression (which is the main thrust of Bernanke's scholarly work). In addition, "inappropriate monetary policy [high rates] led to a deflation" that drove up the value of debt. "We didn't make either of those mistakes," Bernanke said. True enough, and we may have saved ourselves from a devastating downturn because of these moves. But at least the market crash of '29 and the subsequent fallout rooted out the frauds and shysters of that era—men like Richard Whitney, the Boston Brahmin who headed the New York Stock Exchange and was exposed and disgraced as an embezzler. With the exception of a couple of mid-level indictments over at Bear Stearns, it seems doubtful that all that muck will get cleaned out now.