Incorrect
Risky screwy mortgages (these risky loans you refer to) were bundled into mortgage backed securities which were sold off and traded
This activity was manic and highly destructive in and of itself
Credit default swap (CDS) insurance (bets) were then taken out on these securities (MBS)
This made the situation 10x worse
One great example is Goldman Sachs sold a lot of MBS to clients and told them they were very good and highly rated
But behind their backs took out CDS insurance on these very same securities -- bet against them
Like betting that your neighbor's house would burn down right after you sold him 10 gallons of gasoline in what you claimed was a leak proof container
They took this CDS insurance out from AIG
When AIG failed GS was left high and dry and on the brink of failure but Geithner, Paulson and other GS agents bailed them out and made them whole on their AIG CDS bets
Actually 99% of your post was correct except for the above
Excellent summary, Dennis.
These risky loan were my shorthand way of referring to bundled mortgage backed securities. You said good.