What we need, fundamentally, is not simply stricter regulation or less greedy bankers. What we need is better economic theory of how these things play out, so that the regulators have better tools to assess and prevent systemic risk. But that's not how we're thinking right now. What we're looking for is not better tools, but someone to blame.
Because, after all, we know that it wasn't us who was at fault. We're just the victim of broad market forces outside our control.
The one culprit I think she left out is the credit rating agencies -- like Fitch, Moody's and Standard & Poors -- who were giving what we now know were extremely risky CDOs awfully high investment grades. I still don't understand how these companies' risk formulas managed to hit so dangerously off the mark. Some of these CDOs were given the same AAA rating that U.S. Treasury bonds receive.
Maybe the broader lesson here is that we shouldn't expect mathematical certainty when we're assessing human activity . . .
