[Pelham]

“My inner tinfoil hatter has caused me to wonder from time to time if there isn’t some actual, strategic reason to have encouraged such apparent malinvestment.”

I think it’s better explained by epidemic bad judgement on Wall Street. The mortgage and derivatives market began generating huge returns for financial firms, and they ignored warnings from their risk managers because the money was too good.

And more than that, the CEOs barely understood what their traders were doing to generate that profit. It was built on a lot of complex mathematics developed by the quants that they employed. To make matters worse they all began relying on the same misapplied formula, David X Li’s Gaussian copula function, which led the entire industry to think that they had passed off risk when they hadn’t:

http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all

[khelus]

"My inner tinfoil hatter has caused me to wonder from time to time if there isn’t some actual, strategic reason to have encouraged such apparent malinvestment"

"I think it’s better explained by epidemic bad judgment on Wall Street. The mortgage and derivatives market began generating huge returns for financial firms, and they ignored warnings from their risk managers because the money was too good"

IMHO one does not exclude the other. Those who would bring this country down have been very shrewd in exploiting, aiding, and abetting the weaknesses of human nature such as rapacious greed and lust for power.