However, the risks were never actually traded away, but stayed concentrated on the books of the financial corporations involved. There is nothing wrong with risk diversification, but obviously something is wrong with innovative products that are too complex to be understood by the very people who originate and distribute them.
And there is something wrong with markets that are not properly understood by their participants  2  Andrea M. Maechler and Li Lian Ong (2009) “Foreign Banks in the CESE Countries: In for a Penny, in for a Pound?” IMF Working Paper 54/09. 3  Carmen M. Reinhart and Kenneth S. Rogoff (2008) “Is the 2007 U.S. Sub-Prime Financial Crisis So Different?