Wall Street banks with financial ties to mortgage lenders fueled bad -- and often fraudulent -- mortgage lending, created phony mislabeled securities, and off-loaded the temporarily disguised risk on bond insurers (MBIA, Ambac, AIG, FGIC, and more) and naïve investors to keep the Ponzi scheme going. Corrupt finance fueled a housing bubble and damaged the U.S. economy -- while the U.S. was and is at war -- and taxpayers bailed out the chief culprits.
Those with "friends in high places" did the most damage to the nation's economy and personally profited the most. The high pay of Wall Street and its cronies doesn't reflect efficient markets or individual brilliance; it's a market failure. The Great Bailout protected debt holders and some shareholders in corrupt financial institutions. Culprits involved in phony securitizations that damaged the economy have windfall gains -- most of banks' profits now come from proprietary trading--and are now heavily subsidized with taxpayer dollars.
The "financial reform" proposed by Congress is a bipartisan betrayal. Manipulation continues in other markets as explained in the following video in which David Fry and I discuss financial reform, the Goldman Sachs Lawsuit, gold, ongoing global issues, and how to affect change (April 21, 2010):
Janet Tavakoli's book on the causes of the global financial meltdown and how to fix it is Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street.