From an analysis by the Wharton school[0]:
“It’s not just that they missed it, they positively denied that it would happen,” says Wharton finance professor Franklin Allen, arguing that many economists used mathematical models that failed to account for the critical roles that banks and other financial institutions play in the economy. “Even a lot of the central banks in the world use these models,” Allen said. “That’s a large part of the issue. They simply didn’t believe the banks were important.”
They were fundamentally unprepared and many were unwilling to even entertain the idea that the housing market could collapse. That’s what made stories like The Big Short so surreal, they had all these experts telling them that they were wrong, and economists played a major role in that episode.
0: https://knowledge.wharton.upenn.edu/article/why-economists-f...