It's not that a special somebody wouldn't have listened. This wasn't as big an information problem as most people make it out to be. As this, and many other articles explain, bankers and underwriters knew bank fraud was widespread. The general public, who took out the loans, knew they were defrauding banks. Wall Street knew the rating agencies were full of shit. But everybody was making a killing as long as real property kept appreciating, so nobody cared. They all thought they'd be out before the pop.
Lots of people saw this coming. Peter Schiff, among other Austrians, were ringing alarm bells for years. That's part of the problem. People think, "How big a problem can it really be if you're on year number four of telling us what a problem this will be? Surely if it was as bad as you say, it would have happened already/we wouldn't be making all this money." If you read Michael Lewis' The Big Short, you'll get a nice profile of five or six guys who not only saw this coming, but actually timed it perfectly and made fortunes.
You can't solve problems like these by convincing one "important" person of anything, even if its the truth.
This is an extremely important point - there was an epic mass delusion: Real estate can only go up. It permeated not only all of finance, but all of politics, regulators and the general public. The very same people who would have laughed the president out of office are somberly acting indignated that bankers get clean out of the mess they made. Everyone is washing their hands, and the one thing everyone can agree on is that we like banks the least.
This makes me think of peak oil and the fossil fuel crisis, where you have physicists and such ringing the alarm bells and nobody is really paying attention.
As someone who is completely ignorant of investment strategies, would anyone explain how to make a fortune off of an impending financial collapse (when you predict the timing perfectly)? That sounds very interesting.
There are many ways to do this, but the simplest explanation is: you enter an agreement to borrow an asset and agree to give that asset back at a certain date in the future. You then immediately sell the asset. Then, on the date certain, you buy that asset back and give it back to the lender. This is called "shorting" and is very easy to do with fungible assets like publicly traded stocks, bonds, or even collateralized debt obligations. It's so easy and common that you could open up a brokerage account and the broker will actually lend you money to do this.
The problem is timing. Many, many people saw this collapse coming, and most of them got hosed by betting on it. In the above example, say that you borrowed and sold 10,000 shares of Genworth Financial stock on January 1, 2007 because you knew they were sitting on a pile of bad mortgages and the stock price would tank when the music stopped. If you agreed to give that stock back on July 1, 2007, you would have lost money, because the stock went up. If you had just made this bet a few months later, as a few people did, you would have made a killing.
Or the big boogy man from the crisis, credit default swaps. They're complex financial basically insurance that you can take out on any asset, even one you don't own. Many institutions saw the chance of these securitized mortgage assets failing as so remote that they'd sell credit default swaps for fractions of a penny on the dollar on their coverage. They were cheaper and more predictable then shorts and when the crisis hit if you held them you made a killing. Of course a lot of that killing came on the back of the U.S. taxpayer. The number of credit default swaps that they sold were what almost killed AIG, so the government stepped up and covered almost $14 billion of their losses.
Some good answers already but I'll add this despite some overlap:
Likely a lot more approaches than I can think of are available to an entity with hundreds of millions of dollars with which to place a bet. I don't know the specific marketplace and id's when you start to get into products like credit-default swaps, but in general the derivative market allows two parties with opposing views of the future to bet against each other.
Suffice to say that you would create a position with a "short" effect for yourself on the soon-to-be-declining securities: through buying puts (pay now, get cash at expiration if the security's price drops), selling calls (get cash now, bear risk of the security price going up until expiration), shorting a security ("borrow" it now and plan to buy it back at a lower price later if you win, or a higher price if you lose) or sell a put + buy a call (same risk as shorting only no need to borrow the security and lower cost than simply buying a put, and more upside than selling a call).
The difference between institutions and mortals like us is that they are allowed to carry relatively massive positions compared to their capital, presumably because they are supposed to know what they're doing. So a player with $100M could probably take a $2B short position because of the leverage he's allowed, say 20:1 (probably conservative - I've heard of firms reaching 100:1). The effect is that a 5% move in the right direction doubles that $100M, and a 5% move in the wrong direction wipes out the player.
At least in theory said player's PhD quants in the "risk management" department minimize the daily volatility of the net effect of all of the bets placed by different specialists within the organization by placing still more bets. We've all seen stories of traders taking positions though that somehow didn't get flagged or adequately hedged by risk management.
Aside from the rare rogue trader, this obviously doesn't always work and companies "blow up" by accruing a loss larger than their capital. (unless say they're selected to be "bailed out" with extra capital) A "blow up" can cascade because of counter-party risk, meaning that firms on the other side of these trades won't get paid. That's why we had AIG get massively bailed out.
Due to SEC regulations however, we mortals are limited to about 2:1 leverage (or 4:1 intraday) for securities. Options and futures can effect a higher ratio though. If a retail investor gets squeezed, he must immediately deposit more cash or the brokerage will liquidate it for him involuntarily. If he still owes, it becomes a debt like any other.
Lots of people saw this coming. Peter Schiff, among other Austrians, were ringing alarm bells for years. That's part of the problem. People think, "How big a problem can it really be if you're on year number four of telling us what a problem this will be? Surely if it was as bad as you say, it would have happened already/we wouldn't be making all this money." If you read Michael Lewis' The Big Short, you'll get a nice profile of five or six guys who not only saw this coming, but actually timed it perfectly and made fortunes.
You can't solve problems like these by convincing one "important" person of anything, even if its the truth.