ACPL Online Book Club discussion

Why did a handful of outsiders foresee what would happen with the subprimes while neither the heads of the large financial firms nor government regulators saw what was coming? Do you think it was genuine ignorance (the derivatives were simply too obscure to understand) or willful ignorance (no one really wanted to turn off the money spigot)? What about the risk managers for the Wall Street firms—where were they in all of this? Question by LitLovers: http://www.litlovers.com/reading-guid...

The divide between being optimistic and delusional can be hard to maintain, especially in a cultural setting that rewards risk-taking. In addition, the entire was predicated on passing the risk on to the next entity in the chain. They didn't seem to have an objective way of measuring the risks. Although all financial organizations like to think they have good risk management practices, few within an organization are rewarded for saying, "We shouldn't be doing this highly profitable activity because it is too risky." Those who have that responsibility are usually the weakest people in the organization and put in the weakest position.

All of which is to say, "Too big to fail" is the real problem.