In the short run, these markets selected for people who didn't properly analyze the risk. If the average CDO makes you 7% a year until one day it loses 20%, it's not a prudent investment -- but if you somehow estimate that the maximum loss is 2% instead, you will be willing to buy many more of them, and your return on capital will look a whole lot better. If you're not the only one doing this, the flow of all that money into risky products will give you returns even higher than you expected -- and if you're like the average investor, you will adjust your reasoning in retrospect to make yourself as brilliant as possible.

So it's actually unsurprising that people outside of the finance business were disproportionately aware that the whole real estate bubble was crazy. Someone with your views working for a big bank would be the equivalent of a peacock who realizes who impractical those feathers are.