First of all foxes don't guard henhouses they eat both the chickens and the eggs inside. I'm referring to traders within large financial corporations as the foxes and the hens and eggs the world's private monies invested by people like you all over the world.
This is the real reason Bear Stearns, Lehman Brothers, Merrill Lynch and AIG and others seem to be either collapsing or on the verge of collapse or already having collapsed. All this was working for the traders of all these various financial corporations until the subprime problem hit and started lowering values of houses. This ended the financial feasting of financial companies big time. In all businesses there is a saying, "Feast or famine". Every business owner knows this all too well. Life long employees don't necessarily experience this as they get a steady paycheck every week or so. But the company makes millions one month and nothing the next then millions the next and nothing the next. As long as the company has enough to keep paying its employees, the employees and stockholders tend to think everything is okay even when it isn't.
Well, here came sub prime loan housing value loss and people walking away from their sub prime loans in the millions.
When President Reagan deregulated the financial industry some people were very worried at the time that something could go wrong. Well. Here it is!
The Great depression was caused primarily by individual investors buying too many stocks on margin. The collapse came when their stocks collapsed and they had no money to cover the margin calls(margin is borrowed money). This situation caused many people to jump out of windows and shoot themselves because they were financially ruined.
The problem this time is not that. This time it is institutional investors buying on margin, and the companies are collapsing because their unsecured debt is being called in on these margin buys institutionally. Though the subprime collapse could end within a year or two theoretically, the margin collapse of institutional investors of the financials, cities, municipalities, counties, states, and countries will continue until laws are enacted to prevent this kind of problematic investing.
The best idea for new laws is to make people only be able to invest money that is theirs. If the loss is really their loss they will tend not to make such risky investments because that would mean their personal financial collapse or the collapse of their companies.
This sounds like a much better idea than traders investing other peoples money and getting commissions if they succeed and only fired if they don't. If it was your own personal money you would care a lot more if you lost millions or billions in overly risky investments.
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