I don't think it's about psychopathology (although that is present) - it's about norms and operating culture. What these Lehman-ites are saying is that manipulating balance sheets this way is common practice across the sector and has been (possibly) for years and years (maybe decades).

Like many aspects of banking - cheating is fine, until you fail - it's only at crisis time that enough firms fail that we can see the cheating. Of course regulators have been failing - usual things... lack of resources, expertise, capture by industry...

It's like houses built in earthquake zones with sub-standard concrete... you can go 80 years with no problems... then the big earthquake comes and you get found out... but there isn't a lot of incentive to worry about that from a market point of view and if regulators fail...