Bailout

Sub-prime mortgages were so common, the poor were getting in on them as well as real estate speculators. It was simple. You applied for a loan with no money down and no income verification for more then you needed so you could cover the renovation costs and carrying costs. Well, Fannie Mae and Freddie Mac packaged these 13-15% loans and the greedy Wall St money managers bought them to add to their diversified portfolios. This way they could tell their investors that they also have in their portfolios high pay out real estate paper. These money managers knew they were dealing with high risk paper just like risky stocks. They knew it and their buyers knew it, they got that info in writing before they invested.

Bail them out? We shouldn't. Let them fail. New money managers will rise from the deep, many from these same firms. People will lose money, but tough luck. The last time I looked, when my 401k lost money, I didn't get a check from the Government.