Who Knew?

Edmund S. Phelps, the Columbia economics Nobelist, wants the government to take equity (warrants, as in Chrysler), so I'm in good company (link). He also provides a handy thumbnail summary:

Among most economists, it came as a surprise that the banking industry and indeed, most of the financial sector, was so devoted to houses. We had not realized that the investment and innovation in the country's business sector was largely getting by on rich uncles, a tiny cottage industry of venture capitalists out West, and a few private-equity funds doing alternative energy. And we didn't foresee that a trillion or two of losses in an economy with $40 trillion of financial wealth could bring high anxiety and, two weeks ago, near panic.

Afterthought: Not quite sure just how much of this is sarcasm and heavy handed irony. "Didn't foresee," really? Seems to me that a lot of people saw this train wreck whistlin' down the track a long time ago.