Bankers securitizing mortgages knew that their models were highly sensitive to house-price appreciation. If it ever turned negative on a national scale, a lot of bonds that had been rated triple-A, or risk-free, by copula-powered computer models would blow up. But no one was willing to stop the creation of CDOs, and the big investment banks happily kept on building more, drawing their correlation data from a period when real estate only went up.

Salmon doesn’t blame Li, who warned that his formula was being misunderstood and misused. But he does quote Nassim Nicholas Taleb, who says the whole thing was fundamentally flawed:

“People got very excited about the Gaussian copula because of its mathematical elegance, but the thing never worked… Anything that relies on correlation is charlatanism.”

Salmon and Wired add to our understanding of the roots of the crisis with this effort. Applaud Wired for putting this story, which would have scared away a lot of editors, on its cover.

Salmon’s story is paired with one by Daniel Roth arguing for “radical transparency” in the financial system, something that’s much needed. But it gets a few things wrong.

This time, the issue is no longer a lack of transparency. Since the 1933 Securities Bill, corporate America has been required to disclose a deluge of information in a multitude of ways—10-Ks and 10-Qs, earnings calls and Sarbanes-Oxley-mandated 404s.

Actually, the issue is still in large part a lack of transparency. Disclosure is better than it was eighty years ago, of course, but that doesn’t mean corporations, especially Wall Street and the banking industry, which is who we’re really talking about here, are transparent. Hardly. That’s a major part of the problem right now—those things are black boxes and nobody knows exactly how bad the rot is.

The piece is naive in suggesting that our problems would be solved if only banks had to disclose everything in formatted, easily searchable form, allowing the markets to suss out the good and the bad. That’s just another form of market fundamentalism.

That’s tipped off by the subhed:

The financial world doesn’t need new regulations. It needs radical transparency Make companies report results in easy to understand, easy to crunch numbers—and let investors do the rest.

Well, how do you think you’re going to get companies to disclose all this stuff? Out of the goodness of their hearts? There have to be laws to require that or it won’t happen. Those laws are otherwise known as “regulations.”

To make its case, Wired interviews people who aren’t exactly disinterested observers, including the CEO of Edgar Onilne, which compiles a massive database of corporate disclosures, the inventor of the code that will be used to format large-company filings, and former SEC chairman Chris Cox (why this last one? You’ve got me).

Disclosure’s great. Journalists love it. We need it to inform the public and the public needs it to make good decisions. But it’s naive to think it will enable Mr. Market to work his magic and all will be well. Tough rules with teeth are going to have to accompany fuller disclosure.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at