Well, they are all smart. And their systems do make money, for the most part.
Wall street makes the most money from highly specialized, esoteric products with many 'moving parts' to them, ie that they're leveraged to alot of underlying cash flows. The problems with such products, however, is that they're illiquid when people are scared. That means essentially that they can actually be valued at zero, in a worse case scenario.
So their most profitable products, are also their most dangerous to solvency of their balance sheets. It's as if they're walking on a narrow suspended ledge high above a pit, which gets narrower and more difficult to navigate without warning. The place really needs an overseer, a regulator that can see the big picture and isn't blinded by greed and the pressures of keeping your job in such an environment. I really don't know why Wall Street so resists such a powerful regulator, since such an entity would ensure its long term viablility. If you read even a little bit about Wall Street, you'll be amazed at how often major firms (Lazard freres, Salomon Bros.) just blow up and disappear exactly because of the situation I've just described.