dreadedmonkeygod . net

I've kept on asking the silly question over the last couple of weeks ("WTF!"), because nobody's given me a satisfactory answer. Reason Magazine has put forth the first cogent explanation I've seen.

In brief: everyone used to think (with good evidence) that U.S. housing market was, as Alan Greenspan said, "a collection of only loosely connected local markets." Investment firms believed that they could create very safe investments by packaging mortgages from disparate geographic locations, since the mortgages they placed in a given package would be independent.

The problem is that creating these securities created corelation in housing markets, destroying the actual safety of the packaged securities.

Whups.