Here's a brief descripion of one of the worst things Wall Street did to the economy

Yet more on what bought the mortgage crisis on and killed off all five the biggest Wall Street Investment Banks together with AIG , the largest insurance company in the world, all of whom were too big to fail. This is from Vanity Fair. The very worst of it occurred because AIG in the form of their subsidiary AIGFP thought they could make a killing insuring risk (that is, buying the risk portion) of baskets of subprime (risky) mortgages through the use of credit-default swaps (essentially unregulated insurance policies) and because it reduced their projected costs, did not keep any loss reserves as protection against losses. Hey, that's what too big tofail means, doesn't it? In essence the credit default swaps stripped the risk off of the (inherently risky) subprime mortgages and sold it separately to gamblers. (Not all the gamblers realized they were gambling.) Then AIG's loss history got too high, so too late, they quit insuring those risks. But AIG's customers, the Wall Street Investment firms, were making a mint selling the baskets of subprime mortgages and had to have insurance on their product or the investors wouldn't accept that subprime mortgages could be safe enough to invest in. The story follows.

What no one realized was that it was too late. A.I.G. F.P.’s willingness to assume the vast majority of the risk of all the subprime-mortgage bonds created in 2004 and 2005 had created a machine that depended for its fuel on subprime-mortgage loans. “I’m convinced that our input into the system led to a substantial portion of the increase in housing prices in the U.S. We facilitated a trillion dollars in mortgages,” says one trader. “Just us.” Every firm on Wall Street was making fantastic sums of money from this machine, but for the machine to keep running the Wall Street firms needed someone to take the risk. When Gene Park informed them that A.I.G. F.P. would no longer do so—Hello, my name is Gene Park and I’m closing down your business—he became the most hated man on Wall Street.

The big Wall Street firms solved the problem by taking the risk themselves. The hundreds of billions of dollars in subprime losses suffered by Merrill Lynch, Morgan Stanley, Lehman Brothers, Bear Stearns, and the others were hundreds of billions in losses that might otherwise have been suffered by A.I.G. F.P. Unwilling to take the risk of subprime-mortgage bonds in 2004 and 2005, the Wall Street firms swallowed the risk in 2006 and 2007. Lending standards had fallen, property values had risen, and the more recent loans were thus far riskier than the earlier ones, but still they gobbled them up—for if they didn’t, the machine would have ceased to function. The people inside the big Wall Street firms who ran the machine had made so much money for their firms that they were now, in effect, in charge. And they had no interest in anything but keeping it running. A.I.G. F.P. wasn’t an aberration; what happened at A.I.G. F.P. could have happened anywhere on Wall Street … and did.

So much as David Halberstam describe the "Best and the Brightest" who got America into Vietnam at great and unnecessary loss, the Best and the Brightest on Wall Street assumed they understood what they were doing when they sold the innovative financial products.

The current result is that America and the rest of the financial world has been thrown so close to a second Depression that there seemed to be no stopping it as economies around the world have declined over the last year or more. It has only been through some unprecedented, controversial, experimental and fantastically costly government interventions that the unemployment rate is only 9.5% so far. And that is just so far. There is no real assurance yet that the delay on the drop to Depression has been more than temporarily delayed.

Sleep well. The Best and the Brightest are hard at work trying to fix the economic crisis they earlier created. Feel safer yet?