Remember the fall of Lehman Brothers? During that debacle, 38 millions shares of Lehman were sold as naked short sales, driving the price of Lehman shares to practically zero. The U.S. Securities and Exchange Commission (SEC) stood by and did nothing. To this day, whatever investigation into the Lehman failure was due to short selling is not clear. The SEC has not made the names of the naked short sellers public. The Lehman bankruptcy involved securities fraud under SEC regulations. Why aren't the principals being prosecuted and convicted? The SEC has the power to ban firms and individuals from doing business and impose harsh fines on those convicted in this case.

Some big companies have already gone bankrupt. The Tribune Company is the most recent. But, one of the trend's earliest victims was Lehman.

At the economy goes deeper into Hell with each passing month, bankruptcy attorneys will become the richest lawyers in America.

According to MarketWatch, "A sour economy and tight credit market clearly are just the right ingredients to bring about a wave of bankruptcies." There is no shame in it. Airlines have been doing it for decades.

Chapter 11 is actually a nifty way to stiff debt holders and employees. If a company can find an investor who wants to gamble they can get most of a bankrupt firm's assets in court, a debtor-in-possession, a judge can void loans and employment contracts in the name of keeping a troubled firm alive.

All of that may be good for the operations who seek court protection, but the trend would do further damage to the economy. Many of the firms who financed companies that are in trouble are banks. More losses for them will lead to more write-downs. And, that leads to more shareholder dilution and more government aid. On the employment side, cutting big numbers of people increases joblessness. That, in turn, ratchets down consumer spending and pushes up government costs to support those without work.

Otherwise, Chapter 11 is a great idea for companies in peril.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Goldman Sachs (NYSE:GS) has been the premier investment bank in the world for decades. It has been the leader in underwriting fees, M&A, and proprietary trading profits for longer than many bankers can remember. It has also sent senior executive from the company to work in the highest level jobs in Washington.

But, the firm is not immune to the credit crisis. It earnings have been hurt, although less than those of most other financial firms. So, it comes as some surprise that it will cut 10% of its 32,000 person workforce. According to The Wall Street Journal. "The cuts, expected throughout the New York-based company, underscore how much even the mightiest securities firms have been shaken by the 16-month credit crisis."

The news may be bad for Goldman but it is awful for almost every one of the company's competitors, most of which are doing much worse than Goldman is. Some corporation in the industry have already lost people. especially Bear Stearns and Lehman. But, the cutting may have only just begun elsewhere. Several analysts recently put out reports saying Citigroup (NYSE:C) may not make money for over a year.

There had been some hope that the Paulson rescue would improve financials at big banks by enough so that they would not have to take drastic measures, but the capital may not be enough if mortgage markets get worse. If Goldman can cut over 3,000 people, its competitors are probably looking at much larger numbers. There are tens of thousand of Wall St. jobs at risk.

Douglas A. McIntyre is an editor at 247wallst.com.

Let's just say they did spread the rumors, which I don't believe they did (and, as an aside: if a company can be brought down by the corporate equivalent of 7th grade girls passing notes in class, perhaps it doesn't deserve to be in existence anyway).

Late Sunday night it was reported by the Associated Press that the Federal Reserve announced it had approved the request of the two investment banks, Goldman Sachs Group (NYSE: GS) and Morgan Stanley (NYSE: MS), to become commercial banks and to take deposits, bolstering the resources of both institutions.

Since Bear Stearns was acquired in a fire sale by J P.Morgan Chase (NYSE: JPM) in March both firms have been under increased pressure to show their financial strength, but the bankruptcy of Lehman Brothers Holdings (NYSE: LEH) and the buyout of Merrill Lynch (NYSE: MER) by Bank of America (NYSE: BAC) last weekend have changed the playing field too much.

So what does this mean in short? It means the investment banks wanted the comfort and security of mama bear. They wanted the protection of the Federal Reserve, along with the ability to borrow from it at the discount window, and in a worst case scenario, to be bailed out like everyone else.

The Fed, from its perspective, knows this to be true and understands that if the investment banks -- now commercial banks -- can increase their reserves, then maybe a bailout will not be required, which is better for everyone. Along with this change will come additional requirements and regulation.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: I owned BSC and now own shares in its acquirer JPM.

I've put together a good-sized Enron memorabilia collection, inspired by the affordability. I was able to buy an Enron lunch bag on eBay for less than the cost of a similar nonbranded product at Wal-Mart.

The collapses of Lehman Bros. and Bear Stearns aren't anywhere near as interesting but the headlines have attracted a swarm of eBay listings. According to The New York Times, "When a big Wall Street firm goes belly up, one bet you can take to the bank is that memorabilia will be offered for auction on eBay within hours. "

If you're looking to support a charity instead of an opportunist -- or burned employee who, having lost his 401(k) grabbed a stack of mugs on his way out the door -- one seller sold a piece of toast with the initials "BS" and "LB" branded on each side. Proceeds benefit the Children's Diabetes Foundation in Denver. The price? A mere $15.50. A piece of toast that offers the ticker symbols of companies about to collapse would likely be worth far more.

As an investment, I don't think Lehman and Bear memorabilia are compelling: collectibles from the Enron and Worldcom blowups do not appear to have appreciated in value.

With theories flying about the cause of the problems in the financial sector, just about every possibility has been discussed. Unfortunately, the media has given tremendous attention to the "evil short-seller conspiracy" idea but, on his blog, billionaire Mark Cuban offers a more sane alternative: "Risk and reward have been decoupled for CEOs on Wall Street."

Cuban writes: "If you are the CEO of a major public company, once you qualify for your golden parachute there is absolutely no reason not to throw the Hail Mary pass, and do high risk deals every chance you get.... Lets just say for example, you run Fannie May or Freddie Mac. You basically f*** up the entire housing economy. Your punishment ? You walk away with 9mm and 14mm dollars as severance."

Instead of cracking down on short-selling, regulators and especially directors should be looking at the corporate governance issues that led executives at companies like Fannie Mae (NYSE: FNM), Lehman Brothers (NYSE: LEH), and American International Group (NYSE: AIG). One possible solution that is already beginning to take hold at many companies is providing executives with restricted stock grants instead of options so that there is an incentive to retain value rather than betting the farm on growth.

While Cuban's analysis is probably overly simplistic -- the recent mayhem is not only a result of poorly structured CEO pay -- the huge unchecked risks and excessive leverage at so many companies should lead to a renewed call for changes in corporate America.

Historians are likely to look back on this week as one of the most significant in American economic history. This was the week that the government let Lehman Brothers Holdings Inc. (NYSE: LEH) fail -- a record $639 billion bankruptcy, lent $85 billion to keep American International Group (NYSE: AIG) from collapsing, and pumped $300 billion into global financial markets to keep them from seizing up. But that turned out not to be enough to keep the markets afloat -- for that Hank Paulson needed the ultimate bailout.

While I don't remember much of the American History I studied in high school, one thing sticks with me today. It always seems that it takes a major crisis to get America to make big changes. It is never possible for leaders to foresee problems and take action to avert them before they turn catastrophic. The averting catastrophe approach always struck me as far smarter than the crisis approach. However, it seems that lawmakers need tangible evidence of prior bad outcomes to make the case that the status quo is deeply flawed and must change.

While he had already loosened up $800 billion in taxpayer money by Wednesday, Paulson needed an even scarier story to get Washington to agree to an additional $500 billion to create an agency to buy illiquid assets from financial institutions. What exactly did he tell Congress and the president to scare them into agreeing to this plan? AP suggests that he described evidence of the global financial market ceasing to function and painted a frightening picture of the economic and political chaos that would ensue if that functioning ceased for an extended period of time.

Now that a mass of mortgage-related write-downs has swamped major financial companies, Wall Street has turned its attention to the second half of the year to see whether the beatings will continue. Early indications are that they will. Both Lehman Brothers (NYSE: LEH) and Washington Mutual (NYSE: WM) have said they will take reserves for several billion in their third quarters.

The bank that has been hit hardest by the crisis may not even be American. Reuters reports that UBS (NYSE: UBS) will have to write down another $5 billion on its risky investments in the second half of the year according to the Sonntags Zeitung newspaper.

The IMF has predicted that total write-downs driven by the mortgage crisis will hit over $1 trillion. Only about half of that has hit the markets so far. If banks face a tremendous increase in reported losses, most will have to raise money which will cause another round of dilution.

Bank and brokerage stock prices are going much lower.

Douglas A. McIntyre is an editor at 247wallst.com.