Real Estate Bust: What the #$!@&* Happened?

I recently sought out Countrywide Home Loans with the intent of attaining the necessary capital to purchase a base of operations. I completed a one page document of basic inquiries as follows: Income: A Lot. Employment History: Experienced. Ability to Repay: Dunno. Reference: Momma.

The loan officer verified my information by placing a telephone call to my mother who indicated that I had been a good boy and was deserving of the money. Shortly thereafter, $5 Million was placed into my account. I was to be held responsible only for meeting the interest payments over the time frame specified by the fine print. At this point; I would be forced to begin paying down principal and my interest rate would jump to LIBOR plus 15%. 'Details, Details,' grins the Cheshire-Cat mortgage broker. I could always dump the property on some sucker—ahem home buyer before the teaser rate expiration.

Days before hosting the Housewarming Party at my luxurious Biscayne Bay condominium, confusion sets in pertaining to who actually held the mortgage loan and to where I should remit interest payments. The loan had been combined with thousands of other mortgages, credit card debt, auto loans, layaway plans, and the $5 owed to your Uncle Frank. This pool of debt was separated into collateralized debt obligations; [CDO] classifications based upon risk and distributed amongst hedge funds, investment banks, mutual funds, and the school board of Lorain, OH. These units were to be held off the books; carried by structured investment vehicles [SIV] that I was told didn't really exist. Of course, Ratings agencies employed a cosign-tangent-alpha-square root-divisor algorithm to award AAA platinum status to all debt issued in the United States since 1958. I was assured that in the event of disaster the U.S. Treasury and several banks would put together a 'Big Fund' called MLEC to purchase BBB CDOs from the SIVs. Got That?