God knows why Robert Pickel, head of the association of derivatives traders, would want to go on 60 Minutes yesterday to explain credit default swaps. These complex financial instruments—at the center of the credit crisis—are now about as impossible to defend on television as child pornography. Watch this clip from the CBS news show for Pickle's eyebrow-raise when words fail him. It's an enjoyable moment of television but it's time for a defense of Wall Street against their critics in Congress and the media.

Sure, these credit default swaps—a form of insurance against the risk of default—were framed in obfuscating language to get around the regulators. They were hard to evaluate—even by the supposedly sophisticated investment banks like Bear Stearns that have been sunk by the financial crisis.

But the public lynching of Wall Street figures like Pickel and Dick Fuld of Lehman Brothers is both ugly and stupid. There is plenty of blame to go around.


The buyers of the credit default swaps wanted to suspend the natural law of investing; they demanded enhanced returns with the risk taken out which is like wanting luscious-tasting ice cream without fat. Politicians of all parties—including some now hauling Wall Street executives before Congress—encouraged financial innovation and wider home ownership, the two worthy ambitions that have combined in such toxic fashion. And the media that now tortures executives in interviews like that on last night's 60 Minutes has only just discovered what derivatives are in the first place. They were too complex to explain even to readers of the financial press. (See this morning's piece on blaming the media.)

It may be convenient to blame this entire financial mess on the Wall Street fat cats. And a gray and TV-unready character like Pickle certainly makes a wonderful scapegoat. But the unpalatable truth is that bubbles require everybody's participation: politicians both idealistic and corrupt; greedy investment banks; greedy investors; financial journalists cowed by their intellectual and social superiors at the investment banks; and a general public that likes a good boom and doesn't particularly want to hear that it's an illusion.