Republicans have a neat explanation for the credit crash: it was all those loans to poor people to buy houses. We know this is far from the truth, and that the real problem is rich people who couldn’t afford to pay off their loans, like AIG and Lehman Bros. The debt figures at the failed commercial and investment banks are staggering, in the range of hundreds of billions. AIG couldn’t even state its exposure was to its credit default swaps on Lehman Bros. debt two weeks ago. Actually, it’s even worse: one of the reasons AIG and Lehman Bros. can’t pay off their loans is that they paid out so much money to their employees on phony income from leverage at unprecedented levels, and more to their shareholders in dividends and stock repurchases.

Even so, there is no doubt that many middle income people are wildly overextended. How much blame should go to them?

Rich people and businesses borrow money for leverage, and as a way of reducing their own capital at risk. If the interest rate on a loan is less than the expected return from the use the borrower plans for the money, after taxes, then they might as well borrow, rather than front their own money. Middle income people borrow for other reasons.

The most common reason to borrow is to buy a house or a car. The rationale is that major purchases aren’t consumed all at once, so it makes some sense to pay for them over some period of time. After all, people expect that they will be making more money in the future, so they can reasonably think that the monthly payment we can afford today will be a smaller percentage of their income in the future. Similarly, people might borrow for big purchases, appliances, or home improvements, or for a vacation, with the idea of paying it off quickly. So far, so good.

But what happens when things go wrong? Lose a job? Someone in the family get sick when there isn’t insurance, or the insurance is insufficient? Divorce, and suddenly there are two households with single incomes? Well, the same thing happens. People just assume things will get better, so they borrow. They borrow from their 401(k), their credit card, their house. And it works out if, and only if, things do get better.

But if they don’t? What if the entire economy goes in the tank. What if there’s a decade in which the average wage stagnates, or even trickles down. Well, that is today’s situation: too many people who borrowed and cannot pay. Who’s to blame? Not the person who reasonably believed things would get better. After all, they had all kinds of people, cheerleaders from the Republican party, telling them the fundamentals of the economy were strong. Their decision was sensible in the context of the times. They had years of expecting wage and salary increases, and a financial edifice that made borrowing seem perfectly natural. They had role models succeeding by borrowing. They had And they had that good old American optimism.

How does it happen that wages are stagnant for a decade? The old deal was that capital and labor shared the gains from productivity, but that broke down. Now Wall Street and its government cronies don’t want us to look behind that screen to see the people who brought that to pass. They point us to the poor borrowers. It’s their fault, not that of the rich or their government.

Of course there are some people who tried to manipulate the easy debt for their own benefit, and others who piled up the credit cards, getting a new one every now and then to pay off the old ones. And there were speculators buying condos and flipping them to other speculators, none of them expecting actually to inhabit their purchases. But far and away the largest number of borrowers were regular folks, just trying to live the way they thought others did.

Of all the hypocrisy we’ve seen in the last eight years, the toads on Wall Street stand at the top. They sold ridiculous securities to their credulous peers. They only made money by selling, and they needed products to sell, so they encouraged the incompetent mortgage companies and the hucksters and the cheats. They bought legislators and regulators and an entire administration, and got rid of the entire regulatory structure. They managed to buy enough influence to get the bankruptcy amendments of 2005. They got the government to cut their taxes, leading to massive deficits. When their rickety structure began to fail, they ranted about moral hazard for individual borrowers, but they still had enough influence to step into the legislature with the threat of the neutron bomb of financial disaster, and panic our legislature into sucking money from the middle class to bail them out.

They keep their money and you get the blame.