This guy and Warren Buffett have been warning for years the risks involved in the way the financial system was being run, especially in regards to derivatives, pricing risk, unrealistic models and executive remuneration. In one way I hope this will lead to the end of Modern Finance Theory (Samuelson, Merton, Scholes, etc etc) being taught in universities but in another I hope not, a more rational market will lead to fewer opportunities. This should have happened after the events of LTCM in 1997 and I suspect little will change again. We have already the deflection of blame is taking place with "evil/corrupt shorters" acting as the scapegoats.
THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS
Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the "logic of science"; it is the instrument of risk-taking; it is the applied tools of epistemology; you can't be a modern intellectual and not think probabilistically—but... let's not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now. It can even bankrupt the system (let's face it: use of probabilistic methods for the estimation of risks did just blow up the banking system).