"There investment bankers from the largest institutions pleaded successfully with Securities and Exchange Commission (SEC) officials during a short meeting in 2004 to lift a rule specifying debt limits and capital reserves needed for a rainy day."
To me it seems like a lot of the models that the quants came up with were essentially a way to justify the above line of reasoning and to show that dependence on mortgage backed securities was sustainable (when in reality it was a path to a meltdown).. Ofcourse that doesnt mean the quants are to be blamed, when the directive had come from elsewhere...
Yes, the leverage the banks asked for was a bad idea. Coincidentally, 4/5 of those banks either don't exist or don't do i-banking.
But quants along with other strats (macro, long/short, etc) all had bad risk management models. You can't blame only program trading when there was so much human error.
Also: quants (meaning algorithmic trading) did not show how MBS were good. That was human error; Moody's and S&P ratings, for example.
"There investment bankers from the largest institutions pleaded successfully with Securities and Exchange Commission (SEC) officials during a short meeting in 2004 to lift a rule specifying debt limits and capital reserves needed for a rainy day."
To me it seems like a lot of the models that the quants came up with were essentially a way to justify the above line of reasoning and to show that dependence on mortgage backed securities was sustainable (when in reality it was a path to a meltdown).. Ofcourse that doesnt mean the quants are to be blamed, when the directive had come from elsewhere...