Anger runs deep. It is aimed at financiers, who first earned huge and conspicuous bonuses and now successfully force taxpayers to pay for their mistakes. It is also aimed at financial markets, whose merits have been oversold.

The mantra that financial markets always allocate resources better was never true. Financial markets suffer from very serious failures, chiefly information asymmetry. The subprime saga started with beneficial risk diversification until it became a channel for contagion. The saga also revealed the depth of herding among financial institutions – the exact opposite of risk diversification among them. Having followed the same strategy, they all suffered simultaneous losses.