The US Financial System: An Empire in RuinThe financial system was crucial to the role of free enterprise. “Financial markets have come to provide non-financial corporations with mechanisms to manage their risks and to compare and evaluate different investment opportunities in a highly complex global economy” (Cindin, 2008). “Yet, despite the time it took to build our financial institutions, bad luck and lax risk management have jeopardized careers and mortgaged the future of these institutions” (Wallace, 2008). The nation is currently attempting to deal with the largest financial crisis since the Great Depression. It is now imperative to find a way to re-regulate finance without compromising the necessary innovative capacity of finance. The origin of the financial crisis can be traced back to 2006. During that time, companies began purchasing trillions of dollars of complex financial instruments. products called “structured credit derivatives”. The value of these derivatives quickly rose to over one hundred trillion dollars due to high demand from banks around the world. “These paper investments were supposedly backed by loans on homes, cars, businesses, and credit cards” (Francis, 2008). However, several problems have emerged from the sale of these paper investments. The method of producing and trading derivatives is unclear, and no one really knows what credit risk is transferred to whom. Basically the banks were competing for assets of questionable value. Even though the selling of derivatives has disrupted our economy, it is not the main reason why the financial system is now in trouble. Reckless selling of mortgage loans led to the eventual collapse of our financial systems. paper......, Jane and Francis, Theo. Saving the financial system: deal or no deal? (2008). Working week. Retrieved November 2, 2008, from http://www.businessweek.com/bwdaily/dnflash/content/sep2008/db20080925_596844.htmSolomon, Deborah & Crittenden, Michael & Paletta, Damian. US Bailout Calms Markets, But Details Loom (2008). Wall Street Journal. Retrieved November 2, 2008, from http://online.wsj.com/article/SB122191819568460053.html?mod=googlenews_wsjStewart, Heather. The IMF says the US crisis is the biggest financial shock since the Great Depression (2008). Guardian News. Retrieved November 2, 2008, from http://www.guardian.co.uk/business/2008/apr/09/useconomy.subprimecrisisWallace, Michael. Wall Street Talks: What the Bailout Means (2008). Business Week. Retrieved November 2, 2008, from http://www.businessweek.com/investor/content/sep2008/pi20080922_128934.htm