Banks, too, faced a prisoner's dilemma. If, before the crisis, they had exited the riskier types of lending, stopped buying complex derivative instruments and reduced their leverage they would, in the short term, have earned lower profits than their competitors. The chief executive would likely have lost his job, and other staff defected to banks willing to take risks and pay higher bonuses, well before the wisdom of the new strategy had become evident. Even understanding the risks, it was safer to follow the crowd. [...]