“must be a heck of a lot more to it than just bad loans and clueless borrowers. “
Correct. What froze the market were the CDSs. They are basically insurance against default. They are very profitable if nothing goes wrong. But if you make a slight miscalculation they nose dive in value. These were allowed by the SEC to be marked to the market even though there was not a real market for them.
OK hate to do it but what are CDS’s?