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Imagine in 2006 that financial firms had the data to better judge the default risk associated with sub-prime mortgages. Further, imagine that the institutions guaranteeing the performance of the mortgage-related securities used this data to recognize that default risk was in fact a distinct reality, and not a theoretical outcome. And imagine that the fervor that drove the sale and resale of these securities was dampened by newly informed risk managers who could indeed see the future and throttled back their activity in this area. Much like the "Butterfly Effect," now imagine the sea change this insight would have had on home lenders and builders, financial firms, governments, auto manufacturers, and every other segment of the global economy that has been affected by the "credit crisis." What would be different today? Would a TARP still just be something you threw over your boat in the winter?
