An inside look at the financial crisis

Heading Goldman Sachs in 2008, Lloyd Blankfein narrates how the bank navigated the crisis

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bling down with the meltdown. This was something that was managed by the firm due to some smart thinking even before the crisis.

But, more importantly, he highlights how the reputation issue was tougher. While there was admiration and awe to begin with when the firm went through the period successfully, some were aghast at the 'how' of it, which gave way to wild speculation.

The clue, according to him, was the conscious strategy of risk management at the time of the crisis as the company had been evaluating the mortgage values of their portfolio even before the problem came up. This was important because they were able to smell the danger before it set in. By January 2007 they were quite neutral in terms of positions on these exposures. Ironically, the author points out, that even the regulators were not aware how the defaults on subprime mortgages would have spillover effects on the AAA-rated securities. This is a lesson for any financial institution, which should be able to not just smell a crisis but be prepared for it with the risk practices in place.