I have recently watched The Inside Job. I wish I had made this movie. It is on the money. The financial system today is appalling. The only thing that it got wrong is that it thinks government is the right answer—it may be that there is no better alternative, but it is a truly bad one. The fact is that the financial services industry has already bought Congress. It would simply buy more of the regulators—they would get cushy jobs when they leave. Heck, most Fed top regulators not only leave for Wall Street, they come from Wall Street. What do we expect?
The movie also had an indictment of professional economists. A now famous clip from youtube about Mishkin is appalling. (Also, For Some Professors, Disclosure is Academic.) The American Economic Association, and the office of president of Columbia University, and Harvard University should clearly investigate this. However, let us not conclude that the movie got the story right—its task is to entertain and indict, and not to fairly assess. Let's not turn this into a witch hunt.
The movie touched on but did not do much to explain another ethical scandal.
In general, our legal system is corrupt, too. The role of corporate lawyers is not to foster ethical behavior, but to endorse circumventing ethical behavior without breaking the law. This is bad enough.
What is worse is that many academics (economists and otherwise) will defend almost any behavior in exchange for money. This applies especially but not only to large firms that are in the business of providing expert witnessing advice (such as Charles River Associates, Lexecon, etc.) They see themselves not as economic experts whose task it is to provide the court with expert advice, but as economic experts whose task it is to provide the lawyers that hire them with the best economic arguments to defend any behavior.
IMHO, being an advocate is the role of a lawyer, not the role of an expert witness. The simple rule of ethical behavior in court for an expert is whether (s)he would have said tall he same things if (s)he had been hired by the opposite side. If the answer is yes, then the testimony is truthful and ethical. If not, the the testimony is unethical. Remember, the academic is a witness, not an advocate. Concealment and half-truths are just as unethical as a real life, even if this is legal.
The only real way to cure this is for the court itself to hire any independent experts. It should never be the lawyers for the competing parties. Such a practice would reduce the need for experts (and legal billing fees) by about one half—and help both justice and ethics.