Did you ever wonder how all those big banking houses were able to make such fantastically risky investments in mortgage backed securities and derivatives?

At least as far as Lehman Brothers is concerned, their accounting firm turned a blind eye to the risk:

New York prosecutors are poised to file civil fraud charges against Ernst & Young for its alleged role in the collapse of Lehman Brothers, saying the Big Four accounting firm stood by while the investment bank misled investors about its financial health, people familiar with the matter said.

State Attorney General Andrew Cuomo is close to filing the case, which would mark the first time a major accounting firm was targeted for its role in the financial crisis. The suit stems from transactions Lehman allegedly carried out to make its risk appear lower than it actually was.

Lehman Brothers was long one of Ernst & Young's biggest clients, and the accounting firm earned approximately $100 million in fees for its auditing work from 2001 through 2008, say people familiar with the matter.

The suit, led by Mr. Cuomo, New York's governor-elect, could come as early as this week. It is part of a broader investigation into whether some banks misled investors by removing debt from their balance sheets before they reported their financial results to mask their true levels of risk-taking, a person familiar with the case said. The state may seek to impose fines and other penalties.

They're still doing it to this day. The banks are not bound by the law to inform potential investors of the true risk of their derivatives trading. That's why there are lot of Wall Street observers who believe another shock - say, the Euro collapsing - might set off another meltdown since so much paper is once again being churned around in this still largely unregulated market.

It's not a likely scenario. But it isn't impossible and it will be our own fault for not reigning in this kind of blind trading that got us in trouble in the first place.