13 Things You Wish You'd Known in 2007

9. Simple is better than complex: Here's why this blindingly obvious observation bears repeating.

Start with a few million mortgages of varying credit-worthiness and create a series of residential mortgage-backed securities (RMBS) from them. Then take the RMBS and stratify them. Then leverage them up into collateral debt obligations (CDOs). Once that bundling is complete, make complex bets on which layers might default, via credit default swaps (CDS). Gee, how could anything possibly go wrong with that?!

It turns out plenty can go wrong there. Remember, in the universe of financial engineering, simpler is better than complex.

10. Stick to your core competency: E*Trade(ETFC Quote) is an online broker; what was it doing writing subprime mortgages?

Why was Bear Stearns running two hedge funds?

Isn't H&R Block(HRB Quote) a tax preparer? It was making mortgage loans why?

And exactly what was GM's(GM Quote) expertise in underwriting mortgages? (The snarkier among you might be wondering exactly what business GM's expertise is in.)

Had these companies stuck to what they did best (or least badly), they wouldn't be in as much trouble today.

11. Fess up: Whenever a company runs into trouble, it seems to take a page from the same PR playbook. First, it says nothing. Second, it denies. Finally, it makes a begrudging, pitifully small admission. Eventually, the full truth falls out, and the stock tanks with it.