NPR’s This American Life has produced the best explanation in easily understandable layman’s terms I’ve heard regarding the causes of the current financial meltdown. This is a "must listen" if you want to understand exactly what happened. Click on the orange “full episode” link on the left side of the webpage to listen.
For a great explanation of how “credit default swaps” sunk AIG, check this article out.
Rank greed and foolishness on the parts of many homebuyers, mortgage brokers, banks, investment houses, and investors has resulted in the meltdown we currently face. Understanding the financial crisis is simply exercising wisdom. The sad thing is that simple common sense would have saved many people a lot of money and heart ache. It made as much sense as the price of a Toyota Camry rising from $21,000 to $40,000 and expecting the same person who can essentially afford to make a $400 a month car payment over 5 years to pay off that $21K Camry to now be able to pay off the $40K Camry during the same time frame simply by giving them a low interest rate at the start. On its face, it is a ludicrous proposition.
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