Readers suggested a topic surrounding hedge funds and the housing bubble. "In light of Bear Stearns’ and other subprime investing hedge fund failures, did we fail to recognize the benevolent Robin Hood like qualties of the subprime lending industry?"

"From one vantage point, it looks like the financial industry levered money from the super wealthy and transferred it to those who would not otherwise be able to acquire the American Dream. On the other hand and in light of rising foreclosures and falling home prices all across the country, it looks like both sides got hosed."

A reply, "Yes, at the end of the day everybody except for those (realtors, brokers etc.) who made more money from the larger number of transaction loses in this game."

One asked, "What should be done about hedge funds? Or private equity? These are unregulated entities that have WAY too much influence on markets, even globally, affecting entire populations, even prudent folks."

A reply, "This one can unfortunately be laid of the feet of Bernanke and the Fed. With such loose money policy, there is WAY too much liquidity sloshing around trying to find new ways to get itself in trouble."

One pointed overseas. "European and especially German financial authorities have been trying to get some regulation of hedge and private equity. The Fed and Treasury have resisted fiercely since those are key parts of the credit machine they used to pump up the economy since 2002. Because of the global nature of the business, nothing effective can be imposed without (at least) the Euro area, US, UK and Japan agreeing."

From MarketWatch. "Subprime mortgage concerns grew earlier this week after Bear Stearns told clients that two of its hedge funds were worth almost nothing, having lost more than $1 billion partly from leveraged bets in the market for low-end home loans. Other hedge funds, including Basis Capital, United Capital's Horizon funds and UBS's Dillon Read Capital, have warned of similar trouble or shut down."

"Investment banks are exposed to subprime mortgage risks in several ways, according to analyst Bart Narter. After such loans are offered to less creditworthy home buyers, they're packaged up into mortgage-backed securities and sold into the asset-backed securities market."

"Investment banks do the bundling and get paid for the service. They also usually keep a small portion of the loans on their own books, Narter explained."

"The value of some of these subprime mortgage assets has dropped sharply in recent weeks as rating agencies downgraded some securities and some market participants were forced to sell positions to meet margin calls."

"These assets are tough to value, partly because they don't trade much. If there's no clear market price or few trades, banks have to work out the value of the assets based on their own models, Narter said. 'The concern is that they've been very conservative with their estimates and when they actually come to sell these assets, the value will be much lower,' Narter explained."

"Even if they don't have to sell, events such as the collapse of Bear's hedge funds, will put pressure on other banks to re-value their assets too, Narter and others said this week. 'The news will likely not improve the perception that brokers are overvaluing mortgage assets,' said Douglas Sipkin, senior analyst at Wachovia."

"Third-quarter results, not the second-quarter earnings currently being reported, will be the real test, Sipkin added, noting that Bear's warning and downgrades of subprime mortgage-backed securities by Standard & Poor's and Moody's didn't happen until July."

"Banks also lend money to hedge funds that trade mortgage-backed securities. If these hedge funds get in trouble, they can default on those loans."

"One of Basis Capital's hedge funds missed margin calls earlier this week. Its lenders declared the fund in default, tried to seize its assets and could end up selling the collateral at 'distressed' prices, the firm warned."

"Barclays Plc, once an investor in a now worthless Bear Stearns hedge fund that bet on subprime securities, is now considering its options for recovering $400 million it invested in the fund, the Wall Street Journal reported on Saturday."

"Barclays is now considering its options for recovering $400 million that it invested in the fund separately from the loan, the Journal reported, citing people familiar with the matter. The possibilities are a negotiated settlement or litigation."

"The High-Grade Structured Credit Strategies Enhanced Leveraged Fund, in which Barclays invested, is worth nothing, while there is 'very little value' left for investors in the larger, less leveraged High-Grade Structured Credit Strategies Fund, based on estimates at the end of June."

The Boston Globe. "That so many homeowners are having such trouble meeting their mortgage payments could very well mean your own home's value has dropped, that you may not be able to get a home-equity loan, or that your retirement savings will grow more slowly than you planned."

"Conceivably, it could even mean that the global financial system, and by extension the economy and even your job, is threatened."

"The current mortgage mess has many causes, but none is more important than the abuse of an arcane process called securitization. In recent decades, creative bankers developed financial securities whose value was derived from homeowners' mortgage payments."

"This parsing out of risk allowed more investors to provide more credit to more households. And the results, at least at first, couldn't have been more positive. Many low- and middle-income households gained the ability to purchase homes, and US homeownership soared to record levels. So did house prices in many communities."

"But the picture changed after the Federal Reserve began raising interest rates in 2004. Higher mortgage rates plus soaring house prices made housing less affordable, potentially shrinking the market for new mortgages. Rather than allow their lucrative business to shrink, lenders and bankers got creative again, devising new loans with looser terms and lower credit standards."

"By late last year this had produced a kind of credit frenzy."

"Some 2.5 million homeowners, 5 percent of all mortgage holders, are expected to default on their mortgage loans this year and next. This is a record percentage that will mean a whopping $400 billion worth of defaults and $100 billion in losses to investors in mortgage securities."

"Home values will sink. Loans will be tougher to get, meaning fewer families will qualify for mortgages. Foreclosure sales will put more properties on the market at steep discounts. Less housing demand and more supply add up to lower prices."

"What is to be done? Policy makers should not bail anyone out, not borrowers, lenders, nor investment bankers. Easing the financial pain could encourage even more aggressive risk-taking in the future."