By now, Greg Smith's resignation letter heard around the worldwide Web has moved through its arc of infamy-passing from titillating revelation to corporate damage control to widespread imitation and mockery. Most people now realize that the only thing this letter accomplished was to spam this junior player's resume around, which may have been its real intent.

Meanwhile, it's back to business as usual at the venerable Goldman Sachs. Which is a shame. The company deserves to be censured and shunned, but not for any of the reasons Smith stated.

Headlines blare: Goldman Methodically Screws Its Clients! This qualifies as news? Only a fool believes that a top tier investment bank is going to put its clients' interests before its own. The real scandal is that Goldman has been screwing taxpayers-and the rest of the economy-far worse.

I am certain that you will be hard pressed to find systematic illegal activity at Goldman Sachs. These people are lawyered up to the hilt. They know more about securities regulations than the people who wrote them (which I suppose isn't saying much). They know exactly how close to the line they can operate.

And if any employee ever steps over that line, it is either because that individual temporarily outran the company's well-oiled compliance machinery or violated a regulation so vague that nobody knows what it really means until it is selectively enforced. In which case, the plea bargain is bound to cost less than the profit on the transactions because the government will be afraid to litigate such a vague regulation.

No, Goldman Sachs is not a law breaker. With all the former executives and cronies it has parachuted into the halls of government and all the money it showers on politicians running for office, it is actually a law maker. And that is the problem.

Thanks to this last banking crisis, the lines between the Treasury, the Federal Reserve, the Executive branch, and Goldman Sachs have all but disappeared. Using the entirely legal means of calling in chits from both political parties in its hour of need, Goldman Sachs looted the Treasury to save it from a liquidity crisis, cover its speculative investment errors, and make good on winning gambling bets that would have been uncollectable had Uncle Sam not stepped in to bail out counterparties like AIG.

Paying back the bailout money to the one entity that has the power to print it does not forgive the sin. In fact, the very act of printing that money stole value from its rightful owners, whose currency was debased, never to be made whole. The notion that the financial system would not have recovered if not for the federal bailouts is a self-serving lie. Yes, some of our largest financial institutions would have been swept away. Yes, their stockholders would have been wiped out-and deservedly so. But the underlying assets would have still been there, ready to be apportioned by a bankruptcy judge. And a lesson would have been learned not soon to be forgotten.

Instead, Goldman Sachs and other financial industry giants with enough political pull to have made it through the storm have perfected the art of privatizing gains while socializing losses. They tested the limits of moral hazard and won. They know that the next time they inflate an investment bubble that implodes-and there will be a next time-Uncle Sam will have their backs, regardless of which party is in power. The Dodd-Frank legislation does nothing but institutionalize their too big to fail status, while making it harder for would-be competitors to rise to challenge them.

This is not real market capitalism as it once was, should be, and could be again. This is crony capitalism of the worst order.

The dominance of our financial industry by amoral actors like Goldman Sachs, thanks to their access to the public purse, has other insidious consequences. From my perch as an active and engaged alumnus at MIT I have watched a generation of potential engineers, scientists, and entrepreneurs get sucked into the investment banking maw looking for a fast buck. How many products will never be built, how many startups will never be founded, how many diseases will never be cured because these young and talented people are off designing new gambling instruments that, on net, add nothing to the economy?

The political consequences are even more dire. At what point will players like Goldman Sachs have handed so much ammunition to left-wing radicals who cannot tell the difference between crony capitalism and the real thing that they succeed in blowing up Western civilization? If real market capitalists don't step up and speak out against purveyors of cronyism and the politicians from both parties that enable them, it is just a matter of time before we all go down together.