Finance troubles yet again

About a decade ago we had the 1997 East Asian financial crisis which ended up bringing down Long-Term Capital Management

"Long-Term Capital Management (LTCM) was a hedge fund founded in 1994 by John Meriwether (the former vice-chairman and head of bond trading at Salomon Brothers). On its board of directors were Myron Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economics^[1]. Initially enormously successful with annualized returns of over 40% in its first years, in 1998 it lost $4.6 billion in less than four months and became the most prominent example of the risk potential in the hedge fund industry. The fund folded in early 2000."

A decade earlier we had Black Monday (1987) which was fueled by "Program Trading"

From Where Have All the Flowers Gone by Pete Seeger
When will they ever learn?
When will they ever learn?

Now we have Sub Prime Mortgage Meltdown:
Just last March 15th BusinessWeek:
Bear Stearns Shrugs Off Subprime Worries:
"Bear Stearns Shrugs Off Subprime Worries
The Wall Street firm overcame weakness in its mortgage biz thanks to its strength in fixed-income

Since Bear Stearns (BSC) does much of its business in debt markets including mortgage lending, investors have worried about the New York financial services firm during recent weeks as the subprime market melts. But Bear Stearns has a diverse mix of businesses. The company on March 15 posted stronger profits during the three months ended Feb. 28, as its sales improved in other businesses besides mortgages."

Just over 3 months later ...
Bear's Stock Is Acting Like Its Name - WSJ.com:
Shares Drop to Lowest Level in Nearly a Year
As the Wall Street Firm Feels Subprime Chill

"Over the years, Wall Street firm Bear Stearns Cos. has weathered a number of storms. And last week, when the 84-year-old company decided to lend as much as $3.2 billion to a troubled internal hedge fund, it was with an eye toward easing investor anxieties."

A common thread is the idea that automated systems, sometimes known as "Rocket Science" can be applied to markets.
The flaw is that, sooner or later, the exogensis or unaccounted for variable breaks the model, and it fails.