As others have pointed out, the actions taken by the financial firms' employees were not illegal. In hindsight some were harmful and perhaps should have been, but the question should be why weren't they illegal in the first place.

The answer is that regulators did an abysmal job of understanding the perverse incentives that plagued the industry. Among the biggest causes of bad judgment was the incorrect price signaling created by GSEs that were not following proper accounting and disclosure procedures.

On one hand the financial firms had significant regulatory capture and had been enjoying lots of profits due to their success influencing regulators.

But on the other hand, the entire system of "markets" that were most relevant to the crisis were the most heavily regulated and tied to specific policy goals.

It seems odd that we'd ever expect a system that is so politicized to ever be regulated in a rational and appropriate way.

Broadly viewed, we can see that the combination of regulations and areas loosely regulated and left up to the discretion of firms constituted a significant degree of centralized control, which turned out to be "corrupt" enough to result in a lot of bad decisions and the crash that ensued.

If we assume that all systems are prone to this sort of "centralization risk" we can better appreciate the benefits of decentralized governance that exist with some block chain systems.

Forget about jail for what happened in 2008, why should we ever trust financial regulators of financial firms again to regulate our financial system responsibly? Are we supposed to believe that the perverse incentives for regulatory capture, socializing risk, etc., suddenly ceased to exist?

I'd argue that we should not. We should realize that human institutions typically require participants to have some trust in other participants, but that the more trust is required the more vulnerable the institution is to the kind of problems that plagued the finance industry.

We trusted the GSEs to be acting responsibly even though no financials were released. Regulators trusted ratings agencies to apply disciplined processes to rating generation in spite of the profit motive not to do so, the public trusted regulators to ensure adequate underwriting of risk capital, etc., etc. All these things, many of them not even measurable due to the significant accounting slop involved, were vulnerabilities waiting to be exploited.

When a building has marble pillars outside and everyone inside is wearing expensive suits, what we are seeing is signaling of trustworthiness. When the banker is wearing $1500 Italian leather shoes and a $50K watch we can assume he's earned those things by being trustworthy over time. When we enter the high ceilinged room and see the marble we are meant to trust the institution itself. After all, how could this structure, meant to last thousands of years in the elements, not indicate the highest level of accountability and honesty?

We must realize that even the most well-intentioned institutions are vulnerable to centralization risk, aka the corruption of the inner workings and mechanisms in a way that is not at first noticeable but benefits insiders.

The finance industry used to be simply about risk, money and time. But in today's world it typically follows the pattern of taking money as an input, and producing as an output financial products that foist off some of the risk to society so that the owners can make a profit, with the downside risk being borne by society as a whole.

We see this process in action time and again, and it will continue to happen as long as our regulatory approach rewards massive firm size, prevents competition, and socializes losses.

Let's hope that we see an emergence of an alternative system that relies on a lot less trust and is much less vulnerable to centralization and corruption.