The U.S. residential housing market collapse illustrates the consequences of ignoring risk while funding mortgage borrowing. Collateral over-valuation was a foundational piece of the crisis. Over the past few decades, secondary markets, securitization, policy and psychology increased the flow of...

If this was a cooking show, and we were preparing to demonstrate how to create a complex dish that I'll call "The 2008 Financial Crisis," we would start out by assembling our various ingredients. In this case, our ingredients would include sophisticated financial products, rating agency...