Professor Philip Lane:

The population of bankers probably includes extreme versions of greedy, reckless and all of that. From reading the three reports, the Nyberg, Honohan and Regling-Watson reports, one would see examples of where it seemed to make sense to the bankers. They bought the narrative that the world was safer than it used to be. There had not been too many recessions in the preceding decades. Where there was a recession, it was pretty brief. None lasted more than a few months. Even with the currency crisis of 1990 to 1993, recovery from it was reasonably rapid. An individual bankers might have misperceived the collective risk. This is why I am going back to the role of the regulator. Each individual bank might think what it is doing is acceptable but when they are all making the same decisions, one gets a systemic problem. If they are all lending into property and to the same guys and if they are all lending to particular models, then the collective system becomes too risky. The only entity that has the collective view is the regulator. Ultimately, if banks are reckless and so on, so be it, but essentially they can be constrained by regulatory intervention.