While main distortions were to find at the micro level, they had important macroeconomic implications. As argued before, insufficient oversight of financial markets in advanced economies, which ultimately allowed for the originate-and-distribute banking model to develop, led to a separation of those holding credit risks from those monitoring and managing them.
The resulting excessive focus on near-term returns led to a misjudgement of the underlying risk, and created wrong incentives for originators. Such an environment created the conditions for the observed herding behaviour, in which risk control easily became a secondary issue.