Thanks Birch, good information. This one is more systemic than I've gone through.
I've only ridden out the Dot-com boom/bust and that was a different animal - if you watched Technology like I do, you could tell what was coming. E-Commerce, Enron (energy), Real Estate, Commodities - if it doesn't pass the sniff test, and everyone thinks it's the greatest thing since sliced bread, sneak off to the nearest exit, and watch those who played the game get hammered Up to now, that's worked for me.
This time, well, there's no transparency with resold risk and debt, and the guys who resold the debt and bought it have no idea what they have. I do think that this is all due to derivatives. If you can give away the debt and make money, and give someone else the risk, you will write any old loan for McMansions and Luxary condos you can create. Fannie and Freddie didn't back those loans, they were for over their limits. But those are the loans ones that did it. This was not for the sake of poor minorities, they couldn't qualify for $500K-1 million house loans, and that's what you needed for those new Potemkin (lots of hidden cut corners) McMansions/flipper houses that were built or quick sale polished over the last few years.