The risk-management tools banks used before the crisis -- the monitoring technology and strategy models -- were fine, but there were serious defects in "people's roles and the firm's decision-making processes," says Booz & Co.'s Charles Teschner, Peter Golder and Thorsten Liebert. "When common sense fails in so spectacular a fashion, it's not just a gap in basic risk-assessment procedures," he and his co-authors argue. "It's a symptom of a systematic and cultural collapse."

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