>What I remember from reading about the 2008 financial crisis isn't that bankers were incompetent. It's that various parties started packaging up financial instruments to make them look like less risky instruments, so that they could be sold to suckers.
First of all, I disagree: I think risk mispricing ("House prices can't fall across the country"), or incompetence, was the big problem.
But suckers get suckered every day. If big money-runners can't be bothered to understand what they are buying, I don't feel sorry for them.
>Then they insured themselves against those instruments blowing up.
This is standard financial practice. Why would they hold a huge, one-sided bet on the housing market on their books?
Didn't AIG end up on the wrong end of a vast quantity of that "insurance" - which turned out well (it certainly turned out splendidly well for the AIG employees selling the stuff).
First of all, I disagree: I think risk mispricing ("House prices can't fall across the country"), or incompetence, was the big problem.
But suckers get suckered every day. If big money-runners can't be bothered to understand what they are buying, I don't feel sorry for them.
>Then they insured themselves against those instruments blowing up.
This is standard financial practice. Why would they hold a huge, one-sided bet on the housing market on their books?