Those loans were packaged and repackaged and sold and resold domestically and internationally, so much that no one knows what the underlying value of those repackaged bundles of loans really is.
Since no one knows, everyone in the financial markets is scared. Whereas these were seen as great investments, now they are toxic, and lending between large banks, etc., has simply seized.
All because no one knows the real value of what they have in their mortgage portfolios. The good has been sunk...not by the bad...but by the unknown.
The bottom line is STILL (I think) a bunch of bad loans in one single sector of one economy in one country. Less than 5% are bad loans is what I’ve heard — so we have global economic collapse?