Somewhat.
I understood how they would dice up mortgage payment streams into short term maturities and longer term maturities. They could sell the short term maturities to money market funds who had a very strong appetite for them.
Then they would take the longer term payments and sell them to investors seeking higher rates. And those investors had little interest in short term payments.
Unfortunately when the recession hit and mortgages failed. The long term riskier assets disappeared completely. But what roiled the market was when there was enough defaults on short term mortgage payments that one of the Money market funds broke the dollar.
That was the point where the banks stopped lending. And then W went on the news and assured the nation that we were in a crisis. And if we weren’t before, we were then. Im not sure he had any options, but there were warnings earlier that should have been addressed.
You'll have to do your own research because it is too complicated for me to explain here.
In the big picture, the Federal Government actually created the Housing Bubble by demanding that banks lend to lower-income borrowers (get that, lower-income borrowers who really ought not be borrowing or owning homes). Liberals at work
As early as 2004 (IIRC), Fannie Mae and Freddie Mac started buying huge numbers of Alt-A mortgages. They charged large fees and received high margins from these subprime mortgages.
Then the investment banks and foreign banks got into the business of Alt-A and sub-prime mortgages. They were bundled into collateralized debt obligations, usually backed in part by derivative guarantees, and sold to financial institutions around the world.
Loans were basically shoveled out the door by mortgage brokers and banks and resold quickly to waiting investment banks.
This created a massive boom in real estate which oddly trickled upward.
Subprime loans were marketed like junk bonds in that they were incredibly risky but their risk was ameliorated by their incredibly high yields (yields BTW that any idiot like you or me would see couldn't be paid by the borrowers).
Institutions bought slices of these mortgage pools and created what they believed were actuarially sound portfolios. As we know now, they weren't.