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Lenders overconfident in their ability to manage risk

With house prices rising steadily loan default rates fell, and lenders—overweighting recent events, looking at other people lending, and mindful of their immediate financial and competitive incentives—concluded that it was safe to continue lending.

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The Global Financial Crisis
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Long-term causes of the financial crisis?
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Human cognitive biases
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Lenders overconfident in their ability to manage risk
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Better to all fail together than to underperform separately
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Forms of human cognitive bias?
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Homebuyers saw rising house prices as natural order
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Investors underweighted systemic risk
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Regulators overestimated their powers of insight and response
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Cognitive Biases are constant
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