Cheney says no one saw financial crisis coming

Roubini, who began making dire predictions about a U.S. economic collapse back when Americans were still busy flipping condos and doing cash-out refis, has become the oracle of the financial crisis. As early as mid-2006, on his well-read blog and in speeches, he explained why the bursting housing bubble would drive an unusually severe recession. He predicted mortgage defaults would cause financial institutions to fail, and that soaring oil prices, combined with falling home prices, would cause debt-ridden consumers to dramatically cut spending. At the time, most economists were predicting a "soft landing," and even those forecasting a housing downturn didn't foresee its deep impact on the financial system. Today Roubini scoffs at their optimism. "(My view) was so obvious, I don't know how anyone could argue otherwise," he says.

http://www.newsweek.com/id/176339

Another warning voice was that of Gillian Tett, the FT's award-winning capital markets editor. For more than two years Tett, who has a PhD in social anthropology, had pointed to the risks in the sophisticated debt instruments known as credit derivatives. In September 2007, well before before the collapse of Lehman Brothers, Tett identified the heart of the problem. "Although it has been taken as self-evident in recent years that the financial system grows stronger if banks spread their credit risks, some are starting to refine that view... Bankers had become adept at removing credit risk from banks' balance sheets, either by selling the loan directly to outside investors or, more usually, by turning loans into new securities such as bonds and then selling them on the capital markets."

http://www.ft.com/cms/s/0/4fc84eca-cb10-11dd-87d7-000077b07658.html