Best explanation of the financial mess

Wall_street_2 If you want to understand the financial meltdown, read Niall Ferguson's article in Vanity Fair: "Wall Street Lays Another Egg." It logically lays out the causation of the disaster, complete with historical backdrop.

If you're busy, here's my instant summary:

Factor One: Real estate

The belief, going back to Roosevelt, and most recently promulgated by G.W. Bush, that all citizens should own a home.

Factor Two: Converting mortgages into securities

Wall Street bundled mortgages into securities, supposedly attenuating risk, but actually making it hard to ultimately assess the value of the loans. 

Factor Three: Subprime mortgages

The securitization of mortgages theoretically made it possible to take on riskier loans (subprime mortgages), as long as they were bundled with better risk loans. This strategy worked as long as real estate prices kept rising and interest rates remained low.

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