Since no one seems to have mentioned leverage and credit default swaps, here's the first summary I could find: http://www.nakedcapitalism.com/2008/04/credit-def

Since no one seems to have mentioned leverage and credit default swaps, here's the first summary I could find: http://www.nakedcapitalism.com/2008/04/credit-default-swaps-and-bank-leverage.html http://www.nakedcapitalism.com/2008/04/credit-default-swaps-... There are many better if anyone cares to look; the mortgages defaulting lend themselves to a house of cards analogy. Banks were so heavily leveraged that they may not even be able to handle even a small number of defaulting loans on property that decreased in value.