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Wall Street's death: suicide? Murder? Accidental death? or a case of organ failure?

Article Excerpt
You don't have to break a sweat to be a finance skeptic these days. So let's remind ourselves how compelling the logic seemed of the financial innovation that led us to our current predicament not too long ago.

Who wouldn't want credit markets to serve the cause of home ownership? So we start by introducing some real competition into the mortgage lending business. We allow non-banks to make home loans and let them offer creative, more-affordable mortgages to prospective homeowners not well-served by conventional lenders.

Then we enable these loans to be pooled and packaged into securities that can be sold to investors, reducing risk in the process. We divvy up the stream of payments on these home loans further into tranches of varying risk, compensating holders of the riskier kind with higher interest rates. We then call on credit rating agencies to certify that the...

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