Re: Feedback loops can work both ways
Anonymous to preserve my employment.
"A major acknowledged cause of the 2009 crash was that vast sums of money were "invested" in mortgage based securities whose risks were, for rather complex reasons, systematically misassessed."
The reasons were not complex. I had to listen to an asshat executive from second mortgage give a speech to first mortgage where he "explained" that the "models" never predicted the "owners" would walk away from their mortgages when they were still quite capable of making the payments. Oh really? Your model told you it was okay to tack a second mortgage on top so homeowners owed up to 110% of the value. And your model didn't tell you when times got tough people would figure out every dollar of their mortgage was going into your pocket instead of their equity? So you sold them left and right, people walked left and right, and the repackaged mortgage-backed securities collapsed because of a "misassessment". That was no misassessment, it was massive fraud where the securities were packaged based on the first mortgage value and ignoring the second mortgage.
And this asshat from second mortgage business lost his company and his job, but that was okay because he somehow parachuted into the top spot at first mortgage, and literally spoke the words "Nice business you have here."