The vast majority of OTC derivatives was far less disruptive to the banking sector than your average vanilla home mortgage loan during the crisis.
An overwhelming majority of all the banks that failed during the crisis had zero OTC derivatives on their books, but plenty of average vanilla home mortgage loans.
Internal documents from the banks that did deal in more sophisticated financial products show that they had a good understanding of how these products exposed them to risks in the home mortgage market, they just didn't think that housing prices would fall that much.
Despite all this, people like to blame OTC derivatives for the crisis rather than overconfidence in the housing market.
An overwhelming majority of all the banks that failed during the crisis had zero OTC derivatives on their books, but plenty of average vanilla home mortgage loans.
Internal documents from the banks that did deal in more sophisticated financial products show that they had a good understanding of how these products exposed them to risks in the home mortgage market, they just didn't think that housing prices would fall that much.
Despite all this, people like to blame OTC derivatives for the crisis rather than overconfidence in the housing market.
Why is this?