In my view the quants are trying to produce algorithms that respond to what happens, not to cause it to happen. All they do is to increase volty and liquidity, both of which are desireable market features for trading purposes.
The real reason for the credit crunch is the vast worldwide accumulation of debt caused by the fiat money system, which allows banks to endlessly print money with no underlying value (e.g. Gold) and then lend it out. This has been going on for many years and the banks have enjoyed massive profits from it. But when they start lending to risky borrowers then the pendulum has swung too far.
When people can't pay loans back because interest rates have risen too far or because the borrowers were persuaded by the lenders into borrowing more than they could afford, then "we have a problem Houston".
Blaming the quants is just scapegoating imho.
Glenn
