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The big bang.
A lot of you are asking whether the current financial crisis is an outgrowth of the subprime housing mess. We'll be circling back to this in the podcast, but for now, we'll go ahead and say yes.
Investors bundled and sliced mortgages, some of them very risky, into mortgage-backed securities. As homeowners began defaulting on those mortgages, banks and other investors found themselves in a pinch. The housing bubble burst, dragging down the value of the collateral.
The New York Times gave a cool keyhole look into that in a feature on Sunday about Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson. For them, it's all about the housing:
"Going back a long time, maybe a year ago, Ben, as a world-class economist, said to me, 'When you look at the housing bubble and the correction, if the price decline was significant enough,' " the only solution might be a large-scale government intervention, Mr. Paulson said.
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