Few writers are as good as Morris at making financial arcana understandable and even fascinating. Confronted with a report by British regulators warning of a “financial stability level event,” he explains that the language is “civil-service speak for a credit-market Chernobyl.”

One of the most important aspects of the financial architecture that is now collapsing was the way it allowed investors to believe they could make perfectly safe investments when they financed very risky loans. Or, as Morris puts it, “Highly rated bonds magically materialize out of a witches’ soup of very smoky stuff.” He adds, “Very big, very complex, very opaque structures built on extremely rickety foundations are a recipe for collapse.”

The collapse is now under way. In recent years Wall Street profits were built on leverage and on taking risks that were obscure both to regulators and even to the top managements of the banks themselves. Every three months now, we see banks disclosing huge losses from risks that they had never admitted they were taking.

No one  not investors, not managers, not regulators  is sure when this process will end. And that uncertainty has created a credit freeze, with lenders reluctant to lend both because they do not know whom they can trust and because they fear they may need the money to cover losses that are yet to materialize. As the recession gathers steam, there are likely to be more corporate failures than there need to be, because credit has gone from virtually free to all but unavailable.

In recent years, Wall Streeters have often been seen as “responsible guardians of the public trust,” wealthy men who could be relied upon to act in the national interest, as J. P. Morgan did in halting the Panic of 1907 when the government seemed powerless to do so. Former chairmen of Goldman Sachs served as Treasury secretary for both of the occupants of the White House in this century.

As Fraser shows, there has been another view, one that may come to the fore if the recession lingers and millions lose their jobs or homes, while those who brought on the disaster remain wealthy beyond any dream available to normal people. “By the time of the American Revolution there was already a robust plebeian resentment of the aristocrat as parasite, a privileged nonproducer living off the hard labor of those he lorded over,” Fraser writes. It has not helped that the financial lords have not always been subtle about their superiority, as when Jay Gould, the robber baron who ran railroads in the late 19th century, boasted he could hire one half of the working class to kill the other half.

It is one thing to be seen as venal but brilliant, and another to be seen as both greedy and stupid. That is the risk Wall Street now faces.

As Fraser says in writing about the aftermath of the 1929 crash, “Wall Street had proved itself not only ethically challenged and dangerously omnipotent but, more damning than that, omni-incompetent.” And he continues: “During the boom years of the 1920s, the white-shoe world of J. P. Morgan had accepted credit for the nation’s good fortune and been portrayed as a conclave of wise men. Now, under the new circumstances of economic ruination, that same world was treated as criminally irresponsible, pathetic even, an object not only of censure but of mockery. And there is perhaps nothing more fatal for the life expectancy of an elite than to be viewed as ridiculous.”