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Ted Allrich is the founder of The Online Investor and author of the just released book: Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he'll offer advice to investors who are just getting started.

What really happened to these venerable names of Wall Street? They were once so powerful, so unbelievably powerful. How could they fail? Simple: everyone got greedy.

Gordon Gecko wasn't right. Greed isn't good. It's the one element of investing that will take you down, doesn't matter who or what you are. When greed enters the room, rational decisions go out the window. Greed doesn't color your vision. It blinds. And it blinded the management of these companies.

Basically these once pillars of Wall Street took on investments that were bad, very bad. Many of them came from their own investment banking departments where they put together deals that didn't make economic sense but put plenty of fees in the pockets of department heads and bankers. Deals like mortgage-backed securities made up of loans that were made to individuals who couldn't possibly pay them back. But when you pool all of them together, make them into a security, maybe, just maybe, some of them will work out. And besides, there was always some greater fool willing to buy them.

Problem was that all the stupid people already had enough stupid loans. There wasn't enough stupid money to buy the last round of worthless paper. So the brokers were stuck with securities nobody wanted. And they were getting worth less every day because the stupid people were trying to sell their stupid securities back to the dealers who sold them originally. That drove the price down further.

The dealers made really low bids and thought they could steal the securities. And they did. They bought lots and lots of them. But they couldn't sell them. All the stupid money was getting smart real fast. Big losses tend to do that.

The brokers sat in a sea of paper, with more angry clients calling every day, yelling just one thing: "Get us out." The brokers finally couldn't make any more bids for more securities, not even low ball bids. They had no capital to support what they already owned which was going down in value every day, much less add more securities. There capital was being wiped out by the hour by securities they had originated, pooled and sold. They came home to roost. Call it karmic justice, if you like.

The essence of the problem is the greed that drove all these deals. Wall Street people are mostly very intelligent. But they work in an environment that demands more of everything. Your worth is determined by how many fees and commissions you generate. Your swagger comes from the deals you do, the car your drive, the homes you own. That's the culture. And to stay in the game, you have to constantly be coming up with new products and services that can be sold to institutions and the public, even if they aren't the best products and services. After all, since Wall Street types are so smart and make so much money, the buyers must be less smart so it's easy to sell to them if they put enough gibberish around the newest product. Problem was, there were too many bad securities. No matter how they tried to put lipstick on the pig, it was still a pig. But the buyers already had enough pigs. Their pens were full.

So it's not just greed. There's some arrogance in there as well. To top it all off, there's also leverage. Brokerage firms are allowed to borrow heavily against securities, to leverage up their balance sheets. For every one dollar of capital they can have anywhere between $2 to $25 of securities, depending on the category. The firms can hold a security, borrow against it to buy more securities, then take the new securities and borrow more to buy more securities. The leverage goes on and on until it reaches a limit, governed by the SEC and NASD. Maybe those limits were a little too high. Just a guess.

Now the bomb has detonated, and everyone is waiting for the dust to settle. The two major independent brokerage houses, Goldman, Sachs and Morgan, Stanley, have always been known as prudent risk takers. They still have as much greed. It's just that they've kept it under control. Now they'll be able to pick and choose from even more deals, demand more fees, and make more money. That's how it works. To the survivors belong the spoils.

Wall Street will be back. There's always money to back smart people, ones who can manage capital. If you have a brokerage account at Lehman, it will most likely be sold to another firm or you'll be able to get your securities and money out thanks to SIPC and private insurance. It may take awhile because Lehman management will be busy with other things for some time, but you'll be able to get your investments back. Things will resolve. Mostly because Wall Street serves a function: it moves capital from those who have it to those who need it to build businesses. As long as no one gets too greedy in the process, it works very well.

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