Given below is an excerpt from a conversation between two people. Provide a critique.

Moderator: So, what do you people think? Will we ever really understand what happened to the American banking industry well enough to know what should be done?

Appleton: Well, I think banks and S&Ls were simply victims of the environment. We had an inverted yield curve – long rates were lower than short rates – for a while and this made it difficult for financial institutions to reap their normal profits from asset transformation; you know, I’ve never believed in the expectations hypothesis. It’s a theoretical nicety with no practical relevance. Of course, the increased interest rate volatility didn’t help. As if this wasn’t enough, there was an enormous increase in competition, both domestic and international. These institutions must have felt like they were being squeezed by a powerful vise.

Moderator: By the way, Alex, I’ll give you another reason not to like the expectations hypothesis – it’s also wrong.

Appleton: I didn’t know that. Are you sure? In any case, it’s good to know you agree with me, Mike. But frankly, I’m surprised. Knowing how you and Beth feel about this, I thought I’d get more of an argument.
Moderator: Well, cheer up, Alex. My agreement with you is only partial. I agree that depository financial institutions faced a tough environment during the last 15 years or so. But I also think they could have managed their risks more intelligently.
For example, they could have reduced the duration gaps in their asset and liability portfolios and made use of contemporary immunization techniques to hedge their interest rate risks. Like some of the investment banking houses, they could have been more innovative in brokerage activities, so that the resulting fee income would have made banks less dependent on the riskier asset transformation activities. Just look at the profits earned by some investment bankers who stripped Treasuries and sold zeros (pure discount bonds) like CATS (Certificates of Accrual of Treasury Securities) and TIGRS (Treasury Investment Growth Receipts). No, Alex! The real story runs much deeper than your “passive victims of the environment” explanation. I think banks and S&Ls exploited the system and ripped off taxpayers.