Example: here's one from Goldman Sachs which is essentially a sales pitch for adding Mortgage Backed Securities to a portfolio: http://bit.ly/N4dMb
A quote from that: We believe investors have the opportunity to significantly improve their risk/return profile by strategically allocating a portion of their portfolio to the MBS/securitized sector for two important reasons: 1) the historically attractive risk/return profile of the securitized sector and attractive yield opportunities relative to Treasuries and 2) the diversification benefits from introducing new sources of risk and potential return to the portfolio.
Sarcasm aside, I think that you are half right. Some of the financial engineering stuff was genuinely wrong, and financial engineers will have to figure out what.
"Financial Engineering" is discredited and should more discredited.
I'm sure some physics geeks really enjoyed fitting heat equations to financial processes. This exercise ran a foul of the problem that the processes were subject to the normal distribution, were not uncorrelated and had "long tails", etc, etc.. But all these errors were just results of selecting those models which provided actionable data - the markets found those geeks who willing to endorse a dive into reckless asset inflation. This kind of thing has been around since John Law.
The emperor was just as naked five years ago as today. What has changed is what people are willing to see.
Read Nassim Nicholas Taleb. If you're a real geek for this stuff, read Benoit Mandlebrot's financial stuff. HN had a link to Mandlebrot's prediction of the present mess - written in 1998 (when it had almost happened, as opposed to now, when it has happen).
With that in mind, the practitioners of financial engineering aren't really doing so bad (the individuals, not their companies).
You don't think Halliburton, one of the biggest employers of civil engineers, is about making money? Interesting.
With respect to airplanes, I think it is again a proven volume/historical problem. Zeppelins (and blimps) have very low maximum speeds and limited capacity. As for airplane accidents, I don't think they are very frequent so much as it is just that they are generally so heavily broadcast (for good reason).
Watching the Hindenburg burn is just frightening. I think airplane crashes are far less scary because they are so fast. Financial disasters don't really seem to prevent the next bubble, but video of Chernobyl burning and an abandoned city have real impact.
not to mention that balloon vs metal is already very unbalanced