That is an extremely simplistic view of modern economics. What happened is that dirivitives were introduced into the mortgage backed securities markets. Some large institutions like Freddy and Fanny have requirements for the maximum risk that the instruments they purchase can have. As an example lets say we are investing on the flip of a coin. Heads means the investment pays off at 2:1, and tails means you lose your investment. This creates a risk where 50% of the time you lose 100% of your investment. Frank (cousin of Freddy and Fanny) has a risk management policy that all investments he purchases must have a risk of less than 5%. Well, 'obviously' he cant invest in coin flips, which means all thsi excess capital he in generating from conservative investments has to go somewhere. He could invest it in building lemonade stands and thus employing more people, but creating new busineses is time consuming, risky, and creates competition for your existing businesses and workers. So Frank talks to bob about this problem of being denied his god given right to invest in coin flips by the meddling government. Bob looks at the coin flips and says hey, what if there was a way to guarantee that your investment would come up heads 95% of the time. So what Bob does is instead of sellign Frank an investment in 1 coin flip, he packages 100 coin flips into a dirivative instrument, where there are 2 classes of investment. Tier A gets paid whenever there are 5 or more heads, but they only get 50% of the normal winnings. Tier B gets paid whenever there are fewer than 5 heads but they get 950 times their investment. Now suddenly Frank can invest in this because the risk meets the regulatory restrictions of 95% guaranteed return and all Bob has to do is find a sucker to buy the Tier B investment. Tier B is what is called Toxic Waste in the industry, because you cant pay people to take it and its just an accident waiting to happen. Normally its the finanacial institution that created the instrument that gets stuck holding the toxic waste, and when that risk comes home to roost, they want a $700 billion dollar bailout. Essentially they want the american public to be forced into buying this crap.
Its one thing to say the rich create jobs, but its another to assume the risk for their risky investment strategies that have proven faulty several times before. If Govt. continuously baisl them out whats next, a $700 Trillion bailout? Wall Street needs to take this one on the chin and reform its use of these complex financial devices. If the people and institutions taking these economy crippling risks get bailed out what is the incentive to stop taking these risks?