The only thing wrong with your analysis is that nothing was done covertly, all the indicators were public knowledge years in advance and Wall Street HAD to be asleep because being unaware of the danger of DERIVATIVE speculative investment and bad loans bundled with good, then insured past any possibility of covering losses which got the loan packages a AAA rating, absolutely indicates an industry full of sleepwalkers.
Nobody saw it coming because nobody WANTED to see it coming, which is a sad fact of economic awareness on the part of people who should have known better and were in a position to raise alarms years before this hit the fan.
Derivative speculative instruments create bubbles and should be heavily regulated if not outlawed. Those bad loans should have been written off and their losses suffered AS THEY OCCURRED instead of being bundled, insured and resold as AAA; a ticking time bomb.
You need to learn the history of Fannie Mae and Freddie Mac. The meltdown was caused by stupid regulatory policy. When attempts were made to reform the policy Democrats in the US Congress, like Barney Frank, blocked the reforms for political reasons.
The US Government, not Wall Street, is the problem. Notice that the current 0bama "fiscal reform" bill does not fix this derivitives problem? Because the powers that be in DC do not want this direviatives scam fixed. There is too much money to be made using it.