The debt of financial companies increased to levels exceeding the GDP of leading economies. Thus, in the process of taking risks off balance sheets through securitization, these risks returned to the extended banking system itself and the original rationale for securitization got belied. Rather than reducing systemic risk the system of complex securitisaiton and associated derivatives only served to increase systemic risk.
At the European level, that’s a different question. Why do you mention “European”? Because you think that the response of governments has been found wanting so far? I think having a joint, pan-European response would be very important. For example, I think having a single fiscal instrument for the euro area would have been crucial. But we aren’t going to look backwards.