There is a stark contrast between classic capitalism as defined by Adam Smith and Milton Friedman, and the packaging and bundling of derivatives and securities, the ugly cousin of capital creation.

Stock and Debt are integral components of Capital formation.  However, what happens to those instruments beyond the creation of Capital is not necessarily 'capitalism'.  It becomes a different activity.  The bundling of products becomes just that....bundling.  Nothing is 'formed' anew per se.  Instruments are merely repackaged. The initial purpose of capital creation was over.  The 'capitalistic' exercise completed. 

What ensues with the CDOs and the CDSs, sub prime mortgages, etc.  is merely residual activity.  An activity created for commission and trading purposes of Wall Street.  I maintain it is not capitalism.

Once the stock or bond is sold into the market and the capital is raised, what occurs afterward to those items begins to place distance between the capitalistic activity and the 'new' activity.  A golf club can be used as a weapon, but that does not make Callaway a weapons manufacturer.  If a Wall Street firm misuses the 'two iron' ... don't call it golf.

When the left criticizes capitalism, rarely do they move on the entrepreneur who brings to market the new product or service.  Bill Gates and Steve Jobs are safe.  Michael Dell is safe. The people who founded ABC Tool and Die or XYZ Stair Company are safe.   However, Progressive Liberals  often  take sharp aim at Wall Street.  And, they do obtain some traction in that arena.  But, is all that is conducted on Wall Street really capitalism?  Or is it something else....  

Why must we defend entrepreneurship, new service and product development juxtaposed to Credit Default Swaps and Collateralized Debt Obligations peddlers?  These derivative products are not necessary, nor are they transparent.  They can be financial 'time bombs' inserted into our financial system.  The 'bomb makers' are not providing safe products.  Nor are they raising capital.  The 'sausage maker' sees the components, but the institutions buying the sausage can't see past the casing. 

Defenders of Capitalism must distinguish, in their arguments, between the financial games and wizardry of Wall Street, and the 'elbow grease' and risk taking of job creators.

If you do, you will disarm the liberal argument immediately.