HBS Working Knowledge has a must read article for any one interested in understanding the current financial crisis. The commentary includes the perspectives of five faculty members including Dean Jay Light and Nobel prize winner Robert Merton. Dean Light summarizes the whole mess correctly as a matter of "liquidity, leverage and transparency".Merton comments that financial innovation always outpaces regulation--particularly germane. Also noteworthy are historian David Moss' comments that whenever the government writes "risk insurance" there is a risk that the markets will take greater risk--what Moss calls moral hazard.
I wonder if Moss would accept my death penalty proposal in this previous post on the financial crisis?
Note: I got the $250 billion stage one amount correct. My analysis of this article is a bit thin for fear of incurring the wrath of the copyright lawyers at HBS Publishing.