Testifying before Congress about the origins of the 2008 panic, former Fed Chairman Alan Greenspan said:
“It was the failure to properly price such risky assets that precipitated the crisis.... The whole intellectual edifice collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria.
“Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief....”
Those of us who believe that humans, including humans building advanced computer models, are prone to intuitive ...