The 2007 banking crisis resulted from complexity that kept onlookers confused. When people questioned banks being overleveraged and selling mortgages to people who couldn’t afford them, financial experts responded by saying, “It’s extremely complicated. Leave it to us.” But the problem was simple: Banks were spending money on toxic assets with money they didn’t have. Bad mortgages were bundled and sold on the market for more than they were worth. Credit ratings agencies, supposedly independent, received payments to prop up this house of cards. The result was a huge economic disaster.
