Observations on the Science of Finance in the Practice of Finance

Robert Merton gives an explanation on this financial crisis.

Linear Risk vs. No-Linear Reality
When a financial product is created, its risk is supposed to be linear on micro-level. But in the real world, the risk is not linear. Worse, the market risk became very large, because the linear modeled risk and price mis-match the no-linear reality. After a break-even, the market collapsed, as wee saw.
My Thought
The basic problem is that there is no clear definition of "risk". We just don't know the future. All we can do is base on the past experience. And people always model the past differently. So smart people always can create mis-match of risk, and make money. You can simply call them thieves. Then the problem becomes like how can they be thieves without stealing? Because you cannot prove.