re: Just finished reading 'The Big Short' - questions

The real issue going forward, IMO, is how to manage risk without creating inefficient regulation.

The individual payoffs grew so large, so fast, that any traditional check like reputational risk or concern for the firm was thrown out the window. In the 80's, no one wanted to be "that guy" who brought down the partnership. The dynamics change when the payoff runs into the hundreds of millions, and there is no partnership.

Once the world returns to "normal", there will be another run using some new tactic. As someone else mentioned, because there are so few who understand the ever increasingly sophisticated financial products, they have no incentive to work as regulators. The next time someone hits the wall, even the Fed won't be large enough to fix it. LTCM in 1997 was doable. 2008 was a stretch whose effects still aren't totally written. What happens when the positions can't simply be bought out and there isn't enough capital to "shore it up" anymore?