The Minds Behind the Meltdown

A better book is "The Big Short" (<a href="http://en.wikipedia.org/wiki/The_Big_Short" rel="nofollow">http://en.wikipedia.org/wiki/The_Big_Short</a>) its got some incredible stories regarding the market for CDOs and the GFC. A few people in the know actually saw it happening, bet against the whole system, and won.

The housing meltdown happened because there was a housing bubble, and the housing bubble was mostly created by the Government trying to artificially and aggressively influence the market so "everyone can have a home". That's the source. That the banks got involved in it later on and wanted to make easy money is just a symptom and an effect of the initial cause.

"The meltdown also revealed dangerous links in the financial system few had previously realized—that losses in the U.S. housing market could trigger losses in huge stock portfolios that had nothing to do with housing. It was utter chaos driven by pure fear. Nothing like it had ever been seen before. This wasn't supposed to happen!"<p>The author admits the link here. Then lists all sorts of erratic behavior in the stock market. And ultimately fails to connect how quants caused an unsustainable housing bubble.