A post over at the New York Times is arguing that one of the main causes of the financial crisis was inadequate quantitative models - models that tended to understate risk because they failed to provide a realistic model of the way the world works - neither incorporating risks such as a failure of liquidity, nor the complexities of human behaviour.
I certainly agree that the current stable of models which are in widespread use are inadequate given that the competitive market has made the spreads on trades so tight that there is no longer any buffer to cover the many short-falls in the models. Back when vanilla options were an exotic trade, the trader would incorporate plenty of fat in their options trades. Intense competition, a market that has steadily grown over the past 20 years (notwithstanding small glitches), and increased familiarity with the trades has served to camouflage the risks the traders were running in their options books.