One way to make trading stocks even riskier is to trade them with a lot of borrowed money.

In a nutshell that describes what a New York fund manager named Bill Hwang was doing, although his firm was "borrowing" in exotic ways that ordinary investors couldn't.

Before the disaster that recently befell it, rattling the financial markets, Hwang's Archegos Capital Management reportedly managed about $10 billion. More a family investment office than a hedge fund, Archegos wasn't even trading stocks, just derivatives tied to stocks.

Yet the firm seems pretty typical of what you might call modern Wall Street.

And it makes you wonder what they really do for work out there. It's sure not what they used to do.

Trying to make money is not a new tradition on Wall Street, which of course means American finance and not just firms along a short street in lower Manhattan. People started trying to game the markets in the early days of stock exchanges.

Yet the Wall Street investment firms, banks and asset managers prospered for decades because they do something that people really needed done, and that's act as a financial intermediary.

Banks exist because consumers would like their savings kept someplace safe and still earn some interest. Your average consumer is happy to let the bankers make a profit by figuring out which borrower is most likely to pay back a loan on time, with interest.

Even small borrowers need savers to pool their money to make loans happen. Without a bank involved, it might take half the households on the block to come up with enough money to fund one new home mortgage.

The traditional investment firms worked largely the same way. They had access to pools of capital because the clients trusted them to know how to invest it.

That's what good intermediaries do, they steer the capital into productive uses. The Wall Street partners obviously made plenty of mistakes, but they were also putting their own financial necks on the line, too, investing alongside their clients.

By the time the financial crisis of 2007 to 2009 finally eased, no client could still think that the modern, corporate Wall Street banks cared one whit about them.

In one famous example, the premier firm in American finance, the Goldman Sachs Group, created a really bad mortgage-related securities deal on purpose, expecting it to go south. The idea was to benefit one important client. Yet Goldman still happily sold it to other clients, including a German bank.

By then the idea that the Wall Street crowd was playing the role of thoughtful arbiter of where capital should go, to efficiently build businesses and the broader economy, was pretty much a joke.

Judging by things like the recent boom with something called the special purpose acquisition company, or SPACs, not much has changed. Billions of dollars have been raised for these SPACs, which are publicly held shell companies with money but without a business or even much of a business plan.

You can't give anyone credit for carefully directing capital when the deals are sold with no idea what business they would even be in.

The hedge-fund wing of the industry is a different kind of financial intermediary, with a client base that will not have any small savers. They have been star players in the ongoing drama earlier this year around stock trading in companies such as the retailer GameStop — including billions of dollars in losses on a highly leveraged bet that the retailer would keep declining.

That's why it's worth remembering that the investor who essentially invented the modern hedge fund in 1949 called his a "hedged fund" for a reason. He owned stocks as well as sold them short, avoiding the risk of big moves in the broader market.

Now the term hedge fund seems to mean any private investment vehicle that does anything its investors will let it get away with. They use the tools like options and derivatives invented to reduce risk to instead speculate like mad.

That's what happened in the case of Bill Hwang and Archegos Capital Management. Hwang wasn't using a simple margin account, the kind of borrowing arrangement available to regular Joes at a brokerage firm. His firm used complex derivatives, including something called contracts for difference.

As best can be determined, these work a little like the bets people make with the neighbor on the outcome of the Vikings-Packers game, except with millions of dollars at stake and stock price movements determining the winner.

Using leverage to trade, from borrowing money to using derivatives, works great on profitable trades. The leverage supercharges returns on the capital Archegos did put up.

Unfortunately it works the same on the way down, which might leave you with nothing after a bad trade but a pile of ashes. The big investment banks that enabled Archegos eventually realized there was trouble brewing and they had a ton of risk, too. Maybe anyone paying attention on Yahoo Finance could have figured out something at least very weird was happening.

The stock of the very big company ViacomCBS, one of a handful of Archegos Capital favorites, had traded like a penny stock, shooting up from less than $40 per share at the end of last year to $100 earlier this month.

The banks at first tried working together, hoping to resolve the looming Archegos crisis in an orderly, no-one-gets-hurt way. It quickly became a chaotic free-for-all, and in the fire sale of collateral the price of ViacomCBS stock was cut in half.

Goldman Sachs was again involved, and somehow it once again got out unscathed. The burning building of Archegos Capital, on the other hand, did fall heavily on firms like Nomura Holdings and Credit Suisse.

This week Wall Street remained a little nervous, at least according to the coverage in Bloomberg and the Wall Street Journal.

When one professional investor takes staggering risks and then spectacularly blows up, bankers have to worry about what the other hedge funds are really doing. Given what we have seen unfold in the last year, though, some nervousness seems like a good thing. We need a financial system run by people as worried about risk as they are about how to make their next dollar of trading profits. 612-673-4302