William Black makes a point I’ve often tried to make to liberals. Of course his solution is just to ban certain kinds of market transactions. I’m reminded of an old post at Post-Austrian Economics (unfortunately removed from the web) where a sort of public-choice challenge was made to Paul Davidson over how the government could expect to handle such complexities and unexpected events in markets, and I think his conclusion was similar. Black also seems to agree with Sailer on “too-big-to-fail“. Megan McArdle & Noam Scheiber distinguish between the hazards of size & complexity/interconnectedness here, and Karl Smith chides them on the difficulty of dismantling failed banks here.
As a minor rebuttal to Black, Stan Liebowitz argues it was actually not sub-primes that blew up unexpectedly but adjustable rate mortgages.