It’s depressing to see no one talk about mortgage backed securities. The Great Recession happened after large swaths of wealth were held in MBSes backed by ARM mortgages. As the ARMs came due people could no longer afford their homes. Normally the underwriting bank would default the loan and resell the property. But the initiating bank sold the mortgage off soon after minting the deal. The values of the MBSes and related goods and services were priced using a Gaussian copala (sp) function fitted to ever increasing property values from the 80s S&L boom. Ie their model had no conception of normal, average price growth. Society had calculated something like 72$ trillion in MBS capitalization and “realized” a much smaller fraction of that wealth.

Article: https://www.wired.com/2009/02/wp-quant/