The Financial Crisis, Madoff Scandal, Bailout, and Black Boxes

The New York Times had an interesting op-ed piece that starts off mentioning the movie "Slumdog Millionaire", but then goes on to trace the roots of the sub-prime mortgage crisis and the alleged Madoff hedge fund Ponzi scheme to the Wall Street concept of the "black box".

While the author doesn't mean to let crooks and failed regulation (especially, in his opinion, an ineffective SEC) off the hook, he thinks that a lot of this ultimately happened because of the acceptance of "black box" systems - where the automated algorithms are kept hidden (either for proprietary reasons or due to complexity) and the investors just accept it.

Even more interesting, the author of this article feels that the bailouts themselves form a black box system, because the Treasury department is not doing enough to keep the process transparent and track where the money goes.