The Crusading Hedge-Fund Manager

Last October, I stood in the back of a packed Manhattan ballroom listening to hedge-fund manager David Einhorn explain to an audience what had gone wrong with Wall Street. Packaging home loans into securities was a "mediocre idea," he said. Repackaging those securities into yet other securities was a downright bad one. Credit ratings were a joke. Investment banks--he mentioned Bear Stearns and Lehman Bros. by name--took too many risks and disclosed too little.

To be honest, I didn't think much of the speech at the time. One could hear similar critiques every day from finance professors, regulators and even some...