The best explanation I've come up with is people have been playing Russian roulette with mortgages. It's mostly a zero-sum game.* During the boom, a lot of pe

The best explanation I've come up with is people have been playing Russian roulette with mortgages. It's mostly a zero-sum game.* During the boom, a lot of people made money by firing empty rounds at their temples, and got out of the game. But some people fired when there was a bullet in the barrel, losing an amount similar to that gained by the luckier players. The problems come when the gamblers weren't even using their own money to begin with. The winning gamblers got their commissions, management fees, and incentive fees, while the losers don't lose much that is their own. Then, the costs get socialized. The Fed guarantees Bear Stearns for some fucked-up reason, making all taxpayers liable for the gambler's losses. With the Fannie Mae, this happened in reverse; first the gambler was isolated from getting a bullet in her brain, then the gambler proceeded to play Russian roulette. *However, this game is not zero sum when it comes to markets. First, houses are rather illiquid, and second, meltdowns create unemployment and other inefficiencies. There's a reason nobody really plays Russian roulette in real life.