Yesterday, U.S. prosecutors failed in their first high-profile attempt to convict Wall Street characters of purported crimes related to the financial meltdown. But the government’s failure isn’t a setback from the perspective of protecting the economy from inadequately bridled finance.

The feds’ case against two former Bear Stearns hedge funds ended in acquittal, because the jury saw the obvious. The two defendants, Ralph Cioffi and Matthew Tannin, didn’t commit willful crimes in maintaining an optimistic public face as they struggled with huge and sudden losses. Instead, they, like many others, were powerless and panicked in the face of a historic financial meltdown.

The jury’s sympathy toward Cioffi and Tannin may seem surprising. But the outcome has historical precedent. Back in the Thirties, prosecutors tried three times to convict Samuel Insull, a Chicago utility titan, for crimes related to the financial collapse of his massively indebted electricity holding companies, whose failure cost many middle-class investors everything. But each time, the prosecutors failed, because the Insull jurors understood that massive financial failure wasn’t synonymous with crime.

The government my have failed to put Insull away. But it achieved a far more important victory. Washington policymakers, as opposed to prosecutors, understood that criminal prosecutions, while of course necessary for real financial crimes, would not solve the larger problem.

That problem was civil, not criminal. The economy had next to no protection against the predictable excesses of financial-markets optimism and pessimism. Regulatory limits on borrowing for speculation, for example, were nearly non-existent, as were requirements to disclose corporate and financial-market activities to the public.

The government understood this deficiency. It succeeded in creating a civil financial-regulatory system in which private innovation could flourish while staying within reasonable, consistent, well-defined regulatory limits on speculative debt and conforming to new requirements for disclosure.

The current financial crisis — which isn’t over — erupted because the financial world had escaped those limits.

Yesterday, the Cioffi and Tannin jury seemed to understand that the answer to this very real problem isn’t to throw people in jail.

Today, just as in the Thirties, though, enacting the correct civil regulations matters. The task is to apply old-fashioned, consistent, clear rules – limits on borrowing, requirements for public trading of standardized financial instruments, and requirements for fair disclosure — to new types of financial companies and markets, and to keep doing it.

Unfortunately, that’s not what Congress is doing, with its regulatory “fixes.” But that’s a story for another day.

Meanwhile, you can read more about the Bear Stearns case and its lessons in my short City Journal piece here . . .

— Nicole Gelinas, contributing editor to the Manhattan Institute’s City Journal, is author of the forthcoming After the Fall: Saving Capitalism from Wall Street — and Washington.