In order to decrease our collective risk and fix our economy we need to do three things –

Restore Glass-Steagall Act
Ban Naked Credit Default Swaps
Break up companies that are too big to fail

BTW, here’s an extremely complex explanation of how JP Morgan lost $2 billion. I have read it twice and I’m still lost.

Update: The guys at Alphaville have crunched some numbers and they can’t figure out how you can lose $2 billion in some synthetic credit portfolio. They now think that it is impossible to lose that kind of money playing with synthetic credit portfolios. (I have no idea.) Their explanation only gets more complex. My head exploded about two paragraphs ago. What the hell? Regular banks should not be playing with this stuff. Investment houses? Fine. They should be separate and can do what they want with their investors’ money. Banks that we insure…not so much.