A Really Good Explanation Of What Has Happened

From Business Week:

Making sense of this mess is daunting. One good place to start: the ways various financial players indulged in layer upon layer of leverage, much of it far from transparent.

Mortgage lenders threw out common sense underwriting standards.

Wall Street sliced and diced the loans, creating the illusion that risk somehow disappeared in the process.

Hedge funds then multiplied the leverage by borrowing copiously to buy securities based on the rearranged mortgages.

In their version of the game, private equity firms used loads of debt to launch unprecedented buyouts.