In my experience there are two major factors at play. (1) No one gets fired for buying IBM. The prestige money pools like Ivy-league endowments invest in leve

In my experience there are two major factors at play. (1) No one gets fired for buying IBM. The prestige money pools like Ivy-league endowments invest in leveraged loans. If leveraged loans have a nice run and you haven't invested in them, then you will get fired. You will be fired before the bubble pops. If you make big losses on leveraged loans but the prestige money pools did as well, you will not lose your job. Fads and herding are real things. See, e.g. mortgage market 2000-2007. Jeremy Stein wrote about the career aspect of this mechanism in the 1980s. [1] (2) Bailouts. People are aware they exist. Credit ratings agencies explicitly factor the likelihood of a bailout into credit ratings [2]. Creditors know they can hold a government hostage by threating to force a critical industry/company into bankruptcy. Sometimes they explicitly frame it as "bail me out or I put X critical company in bankruptcy" [3]. Also, please read about the leverage ratchet effect [4]. [1] https://scholar.harvard.edu/stein/publications/herd-behavior-and-investment https://scholar.harvard.edu/stein/publications/herd-behavior... [2]https://www.moodys.com/researchdocumentcontentpage.aspx?docid=pbc_186998 https://www.moodys.com/researchdocumentcontentpage.aspx?doci... [3] https://www.latimes.com/archives/la-xpm-2001-jan-16-mn-12864-story.html https://www.latimes.com/archives/la-xpm-2001-jan-16-mn-12864... [4] https://www.gsb.stanford.edu/faculty-research/working-papers/leverage-ratchet-effect https://www.gsb.stanford.edu/faculty-research/working-papers...