[Gorton's book on the financial crisis explains that] there are no conspicuous villains, no gobsmackingly stupid errors. So, it will never be very satisfying to most people, who like to think it was all hubris, a bad formula, greed, meanness, or lack of sufficient regulation.The problems are structural...the rest of the post explains. Very interestingly, either the book or Eric points out that the financial crisis may rest on a confidence crisis caused by correct Bayesian updating:
AAA securities have a 0.01% default rate, so from a bayesian perspective, when you see a default here the probability is not that one was very unfortunate, but rather, the rating was wrong. Perhaps all ratings are wrong?!.Also rather pro-business cycle.