You're confusing structured finance and derivatives. While this may seem easy to do, its based on a simplistic inference of the english modifiers. The primary t

You're confusing structured finance and derivatives. While this may seem easy to do, its based on a simplistic inference of the english modifiers. The primary things that got the housing crisis going were variations of debt contracts. The parties to these contracts were borrowers (ie, home owners) and Lenders (banks, etc). It takes both sides to agree on entering the underlying contracts (eg subprime loans). There is real cash between the parties and real "services" being rendered in the sense of capital allocation in the economy. A derivative, on the other hand, is a contract between to parties that <has nothing to do contractually> with the underlying assets, with respect to their initial deployment of capital. Example: a derivative on a stock, is not a contract between the stock issuing company and another thrid party; the derivative contract does not fund a business plan directly nor receive payment from the company per-se [1]. The controversy around derivatives and their regulation has <precisely> to do with this disconnect, actually. [1] Except incidentally.