The simplest way to straighten out the financial mess that is capitalism is to remove these "financial instruments" (exotic debt instruments, highly leveraged warrants, etc) and get back to basics.
If you can afford it, buy it.
If you can't afford it, tough.
One of the big issues started when economists decided that debt (people owing YOU money) was an asset, not a liability. Surely common sense would say that until it is paid off in full there is a possibility that it may not be paid off at all? Given that possibility then there is only one way it can be viewed, isn't there?
This is what the "Sub-Prime" mess in the US was all about - the fact that the people given the loans had no way of paying them off with the resultant increase in financial defaults and foreclosures. This caused the slump in housing prices and the remainder of the loanholders simply walking away, leaving the banks with huge unpaid loans on worthless properties, with the loanholders going into bankruptcy therefore protecting themselves from legal action.