1. Easy Money
2. Money into Mortgages
3. Mortgages into MBS’s (Mortgage Backed Securities)
4. MBS’s get AAA-ratings
5. MBS’s moved off balance sheets
6. MBS’s are marked to market (valued based on future protections)
7. A safety net to encourage it (FDIC insurance and “too big to fail” doctrine)
Just like I showed in my two-part series on the financial crisis (part 1 and part 2), Johan Norberg illustrates how the government had its fingerprints all over the mortgage meltdown. Johan Norberg’s full discussion can be found here.