Alex Epstein

Every few days we hear that another leading financial institution has written down billions more on subprime investments gone bad. Nearly every major financial institution, it turns out, had a hand in loans to low-credit borrowers—borrowers whose ability to pay often hinged on endlessly low interest rates or a strong housing market. How could this happen? How could nearly all the leading lights of the financial industry—the experts in assessing and managing risk—expose themselves to such massive losses? Or, as a Fortune cover crudely put it: "What were they smoking?"