Prof. Paul Krugman has generated some surprsing criticism from the likes of Barry Ritholtz and Bonddad for an article he posted the other day in the New York Times, entitled The Market Mystique:

Here are the crucial paragraphs:

Above all, the key promise of securitization — that it would make the financial system more robust by spreading risk more widely — turned out to be a lie. Banks used securitization to increase their risk, not reduce it, and in the process they made the economy more, not less, vulnerable to financial disruption.
....
I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.