Of course, the hedge-funders didn't publicize their findings; they were seeking an informational edge. But imagine if everyone had access to the same data-crunching tools: Risky mortgage-backed securities would have been exposed, and banks, anxious to protect their reputations, would have stopped offering them. With complete information—including much more frequent posting of loan status—the market would likely have self-regulated as risk-fearing investors fled from companies holding or issuing the risky securities.

That's the kind of scenario that has kept Charlie Hoffman motivated for the past decade. A 50-year-old accountant from Tacoma, Washington, Hoffman is the originator of XBRL, a set of tags that standardizes financial information. Hoffman stumbled on the idea while trying to figure out a way to automate the tedious auditing process. ("Basically, I'm lazy," he says.) But while Moyer's team was forced to create complicated algorithms to codify kludgy financial documents after they were filed, Hoffman is agitating for companies to file their data in a standardized format from the very start. Today, nearly 50 companies report their information in XBRL to the SEC, but Hoffman says the protocol's real power will be realized only when every company starts using it—to keep track of their own operations as well as to report their numbers to investors and regulators. If all businesses are required to tag their every move, from each iPhone sold by Apple to every interest payment made by Exxon, they won't be able to engage in the kind of balance-sheet chicanery that kept Enron's investors in the dark. "Financial reporting should work the way that an iPod works," Hoffman says. "It should just be elegant and simple."

A few years ago, when banking regulators started requiring filings in XBRL from its member banks, it found that the time it took auditors to review a bank's quarterly financial information dropped from about 70 days to two. More regulators are catching on: Last December, the SEC announced that by June, every company with a market capitalization over $5 billion will be required to submit all filings using the format. And all publicly traded companies and mutual funds must follow suit by 2011. The result, Hoffman says, is that every investor will soon have the same ability as Moyer's hedge fund managers to export, manipulate, and mash up financial data. "Look how blogs changed news reporting," he says. "Anybody is a reporter. With XBRL, anyone can be an analyst."

But the government is just playing footsie with the kind of reform that's needed. If future financial crises are to be avoided, XBRL shouldn't be limited to public companies. It should become the lingua franca of every investment bank, hedge fund, pension fund, insurance company, and endowment fund. Today these groups contribute to a multitrillion-dollar shadow banking system of lightly (or not-at-all) regulated financial instruments that move markets and tend to bring outsize riches—until they blow up. Take collateralized debt obligations. These are mortgage-backed securities blended with other assets—say, auto loans or credit card debt—into one asset-backed pie, sliced up according to risk and sold as an investment. It is impossible to track any one loan in a CDO; when it is combined and divided with other loans, it loses its independent identity. When the ratings agencies tried to determine default risks for CDOs, all they saw were vaguely defined pools of assets. They had little idea what was in them, and their models—like David X. Li's ubiquitous copula function (see Recipe for Disaster: The Formula That Killed Wall Street)—would prove inadequate at evaluating them.

But if those mortgages and loans carried XBRL tags, and everybody who touched them along the way was required to use those tags as well, anyone would have been able to track their circuitous route through the financial industry and judge each CDO based on its actual content. They could have seen which loans were in default and which weren't, which CDO was overweight on Las Vegas real estate and which was in the relatively safe Louisville market. An amateur risk assessor could have separated the junk assets from those worth keeping and either bet against the companies holding the garbage, blogged about it, alerted the Feds—or all of the above. (The very act of disclosure may compel companies to behave better in the first place: When Los Angeles started requiring restaurants to post their hygiene grades in their windows, average cleanliness increased by 5 percent and revenues by 3 percent.)

Tracking Wall Street's complex inventions may be difficult for regulators, but it's a snap given the right software. "I did a lot of work in clinical trials information when I was at Microsoft," says Moyer, who is a big believer in XBRL. "And if you look at the numbers that are involved in genomics, proteomics, and cell-level sequencing, those problems dwarf what we're dealing with here. It's a simple computer problem."

When data is kept under lock and key, as mysterious as a temple secret, only the priests can read and interpret it. But place it in the public domain and suddenly it takes on new life. People start playing with the information, reaching strange new conclusions or raising questions that no one else would think to ask. It is impossible to predict who will become obsessed with the data or why—but someone will.

Last fall, Kevin Bartz was seeking information about the mortgage business. Bartz, a PhD student in statistics at Harvard who had worked for Google, Microsoft, and Yahoo, was earning extra money doing consulting work for a mortgage broker in Pasadena, California. The company wanted to pool some of its mortgages and find buyers for the debt. But selling the securities required being able to explain how these assets had performed in the past. Bartz found that most of the information he needed was locked up in proprietary databases. There was no way to know basic information about the loans his employer wanted to hawk—where they had originated, whether they had been paid on time, whether they had defaulted. He was struck by the lack of transparency and broadened his project: Discover a way to assess credit risk and beat the banks at their own game.

His research led him to LendingClub, a Web site that matches individual lenders with borrowers who need loans. Like other peer-to-peer lending companies, LendingClub asks borrowers to provide personal details—education, employment history, salary—and to write essays explaining why they want a loan and how they plan to pay it back. LendingClub runs its own credit checks, sorts borrowers by default risk, and comes up with interest rates. But LendingClub is unique in that it makes nearly all that information public (aside from data that could lead to privacy concerns), giving lenders the ability to sort through its database. It also tracks and publishes the history of every loan it helps broker.