I know a lot of people who work in finance. Most of them have no idea ohow the system works. Many of them have no idea how their companies work. They know the products and services on which they work, and they know the factors that go into how they get paid. So, if the person is someone who works at analyzing credit for companies seeking to enter the capital markets to finance debt, then they'll know how to analyze the company from a credit perspective, figure out what the company needs to do to get debt financing, and figure out how their company and they will get paid to arrange for such financing. If they work at providing financing for pension obligations, then their knowledge will encompass the information needed to do that and will less focused on analyzing the companies credit. If they work in lease finacning, then they will know that information. And if they work in securitizing mortgage-backed securities, then that wll be their area.

The key I've seen to understanding how these companies functioned is that the people who worked in given area only get paid if they work on deals that are executed. This works the same for a mortgage broker, a real estate agent or broker, or almost anyone selling anything; no sales means no revenue. The system created an incentive for anyone in any of these positions to sell products and services, and there was little incentive to care about the future of the investment.

The large financial houses did not function as traditional banks, and anyone who looked at their businesses should have known this was the case. Community and regional banks are generally doing better, relative to the big houses, because they took a different approach to business. They did not use as much leverage, they knew their customers better, and they did not expect to returns on capital that were as high as the big financial houses.

Their are many reasons for why and how the economy has gotten to this stage, but how the big financial houses worked is part of it.