Europeans were gloating about the American financial crisis. Not anymore.

Until last week, Europe had witnessed the type of anti-American gloating usually seen only during the soccer World Cup, the quadrennial event in which the American team is routed in the early rounds. The spectacle of highly paid American bankers falling on their faces inspired smug lectures from afar about the reckless pursuit of profits, disdain for regulation, and manic risk-taking that characterize U.S.-style capitalism.

The tsk-tsk-ing reached a new level with a cover story in the German newsweekly Der Spiegel, "The End of Arrogance": "The banking crisis is upending American dominance of the financial markets and world politics." The piece notes the delicious irony of the United States having to nationalize parts of its financial system. "The Americans are now paying the price for their pride," it notes. "Gone are the days when the U.S. could go into debt with abandon." Gone, too, are the days of "turbo-capitalism" imposing its mores of "avarice and greed" on the global economy. No wonder schadenfreude—that lovely word meaning joy at other people's suffering—was coined in German.

But now the clog is on the other foot. Germany has been forced to bail out the nation's second-largest property lender. Iceland, whose financial system now swims with the fishes, has seized several banks. Britain unveiled an expensive plan to inject up to $88 billion of capital into proud financial institutions such as Barclays. Several European countries have hastened to boost deposit insurance.

Some of the wooziness can be blamed on a virus that originated in the United States. But—I got your irony right here, Klaus—just as the American-ness of America's economic system led to our current woes, the European-ness of the Continent's political and business culture is partly to blame for its current pickle. In fact, in many respects, Europe's banks have fared no better than their American cousins.

Der Spiegel noted with disapproval that "the total value of all outstanding mortgage loans in the United States—$11 trillion—is almost as large as the country's gross domestic product." Surely the good burghers of Brussels and shopkeepers of England wouldn't be so foolish with debt, would they? But in Europe, "they embraced financial capitalism and leverage more than we did," says David Smick, founder of International Economy magazine and author of The World Is Curved. The assets of tiny Iceland's big banks were about 10 times the island nation's gross domestic product. Martin Wolf, the magisterial Financial Times commentator, noted that the combined assets of Britain's Big Five banks are four times the Sceptred Isle's GDP. The assets of JPMorgan Chase, the largest U.S. bank, is only about 7 percent of America's annual output.

Europe today is at once cosmopolitan and integrated—goods, services, capital, and people flow freely within the European common market—and stubbornly parochial and nationalistic. While the European Central Bank controls monetary policy for the entire euro zone, member countries regulate their own banks. Most Europeans use the euro, but the euros sitting in banks are insured by more than two dozen different deposit-insurance regimes. The Continent's banks have behaved like Ferraris—souped-up hot rods zipping from the autobahn to the autostrada—while the Continent's regulatory system is like a Yugo.