I think I get it! I will look at the Tett book. From what I am piecing together, VAR was a big problem, but the incentive structure seems to have been a worse one: there were people in the system who could get rich off transferring harms to other people; they were supposed to have skin in the game but apparently nobody noticed that the fees they were getting more than made up for not getting paid from the high-risk tranches they were still holding. But what really gets me is how close to the edge everyone was willing to play--when 9% default on the underlying mortgages will throw the whole structure into default, and the historic rate on non-crappy debt is 4%, well, yikes. Plus there's a point at which one guy notices that a double-digit percentage of the loans are in default as of the first payment, which is to say that the borrower didn't even make the first payment--what kind of loan is that?!