WASHINGTON — Every story has a beginning and an end. Maybe a prologue and an epilogue.

Consider the Great Financial Meltdown of 2008. Most analysts believe its roots lie in the crazy U.S. mortgage market. Vast global pools of cash searching for a lucrative home. Shady bankers and mortgage brokers hungry for big fees. Tens of millions of Americans blindly chasing the dream of home ownership.

No money down. No questions asked.

Excess was everywhere. You wanted it? It was yours.

But what makes this tale a tragedy is that there were so many obvious warning signs along the way. We should all have known better. And it began long before the U.S. housing market took off like a sprinter on steroids.

Our story begins with Enron Corp., a company many people had never heard of before it collapsed seven years ago. And the final chapter features Bernard Madoff, a shadowy New York hedge manager to the well-heeled.

Think back to late fall, 2001. Enron was coming undone in a colossal accounting scandal.

That's what we all thought, anyway - that Enron was, at its core, an accounting failure. With tighter rules, shareholders would have known about all the off-balance-sheet shenanigans that brought down the energy-trading giant.

Federal prosecutors went on a rampage. They nailed outside accountant Arthur Andersen, and the top executives within - Kenneth Lay, Jeffrey Skilling, Andrew Fastow and nearly a dozen others.

There were other rogue companies - WorldCom, Adelphia and Tyco. The U.S. Congress responded by rewriting accounting rules for public companies in the watershed Sarbanes-Oxley legislation. The law spelled out vastly enhanced oversight responsibilities for boards, executives and accounting firms. U.S. President George W. Bush called Sarbanes-Oxley the "the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt."

And we all felt better. The crooks, after all, were safely behind bars.

But the most important lesson of Enron was not about rogue accountants and executives. The company's demise offered a rare glimpse into a massive, parallel and almost entirely unregulated financial system.

It wasn't just a U.S. phenomenon. It was global. Complex and obscure instruments were being traded in a vast shadow financial system, whose main allure was that it wasn't regulated. In Enron's case, it was energy and telecom bandwidth contracts.

That was nothing compared with the vast market for credit default swaps - insurance-like protection against losses on loans and other investments. CDS's were just taking off when Enron went down. By early this year, the market had ballooned to $50-trillion (U.S.) - twice the size of the U.S. stock market and nearly four times greater than the annual size of the U.S. economy.

That's a monster shadow.

Everything was being securitized, repackaged and traded - far from the prying eyes of regulators.

This financial black market grew exponentially post-Enron, eclipsing the public market authorities tried so hard to regulate.

Economists and policy makers in Canada, and elsewhere, wrongly assumed the rest of the world would escape the U.S. mess. We're not the United States. We don't do subprime. Our banks are strong. Our government finances are in good shape.

That, of course, was dead wrong. The mortgage market, like Enron, was a symptom of a larger problem. But it wasn't the central problem.

Financial institutions were the link between the public market and the black market. They borrowed from depositors and they invested in the burgeoning shadow system.

Enter Mr. Madoff, a New York hedge fund manager and former Nasdaq chairman. In Palm Beach and Wall Street, where he plied his trade, Mr. Madoff was known for delivering steady returns to his wealthy investors - typically 11 per cent a year, paid out in monthly instalments.

He was registered with the U.S. Securities and Exchange Commission. But as a hedge fund, closed to all but the friends of Bernie, his business was not actively regulated. He disclosed little to the clients, who typically came to him by word of mouth, friend to friend. The fund grew to some $50-billion.

He credited his success with an innovative hedging system, which supposedly allowed him to accurately match put and call options. Most experts were rightly dubious. But who really knew?

Thousands of wealthy investors - including banks, other hedge funds and successful business people - grew addicted to the apparently guaranteed returns. They asked few questions as they cashed their cheques, and plowed returns back into his fund. Many used their growing paper nest egg as collateral on inflated properties in Florida, Manhattan or the Hamptons, fuelling the unreal real estate binge.

It was like borrowing on a mirage.

Mr. Madoff apparently didn't have a strategy beyond paying his existing investors from an expanding pool of new investors.

The blue-chip members of Mr. Madoff's club should have known better. What legitimate investment yields two to three times more than triple-A-rated bonds, year after year? The answer is, of course, none.

Looking back, the lesson policy makers should take from the Enron-to-Madoff era is that regulators must have the power to constantly look in the dark corners of the financial market for risks to the entire system. It's no place for laissez-faire.

The consolation for most of us, who don't own lavish homes in Palm Beach or on Park Avenue is that the 40 per cent we've lost in the markets in the past year looks pretty good next to Mr. Madoff's clients, many of whom have lost everything.