Risk managers and investment bankers and actually, all kinds of investors took on more risk than they expected. So there was a failure of risk management. There was a failure to recognize how much risk there was in some of these securities that people bought.

Well if you've got information about a company, or you believe that a company is undervalued, you can go out and buy their stock and you can make some profit on it.

I think the credit default swaps can take the place of the rating agencies who really have missed the ball in this procedure and are quite conflicted by the way the ratings are paid for. So, I would like to see credit default swaps become an evermore important way of understanding credit risk in the economy.

Allowing short selling is allowing people to sell - instead of having to buy the stock and then sell it, which doesn't do much; allow them to sell it, and then buy it. In which case they can express that information and the idea is that you would get more accurate valuation of companies by letting people express both their positive information and their negative information through either long or short selling.

When large companies take on risk, then they impose risks on the rest of the system. And these are systemic risks and these systemic risks we never used to think were really that important, but as soon as we recognize how the financial sector - the risks the financial sector takes on can impact the entire global economy, we realize that those risks needed to be controlled for the social good.

The collateralized debt obligation, the CDO, is a structure which allows you to more or less continuously choose how much risk you want to take in a whole batch of securities. And the reason why they got us into so much trouble is that it's hard to figure out how much risk you really are taking.

I don't see what the alternative to risk management is. If it's just getting rid of the models and instead using the smart people who can figure it out? How do you train them? What do you teach them? Do you just put them in a cockpit and let them stumble for 10 years of their life and then after that they're good at it?