Mr. Davidson said that the idiosyncrasy of the instruments, combined with the overlay of technology, allowed the traders to live in denial. They would sit at terminals and use data — historical data that had been gathered before they started giving out money to people with no ability to pay — and decide that the risks were manageable. All of it was unreal, ineffable, tough to know. Except the way it turned out, as Mr. Davidson notes near the end of the story.
"banks froze up in fear that every piece of paper was tainted. As a result, they refused to enter into the most routine kinds of transactions with one another."