Moving beyond money for nothing

Essay: Roadmap to Recovery

At the end of the day the current credit meltdown can be tied to one thing: easy money.

Regardless of how many times we hear terms like "CDS," "CDOs," "synthetics," and all the other buzzwords of the high-finance world, it comes down to giving too many people too much credit — credit that they didn’t have a chance to repay once the housing market went sideways.

While there are many examples, the ever-popular option-ARM (adjustable-rate mortgage) — particularly in areas like California, Las Vegas and Florida — allowed people to buy homes at seven to 12 times their annual income by using negative amortization and a rising housing market to mask a dangerous gamble that the market would let them flip the house before they had to make a fully amortized payment.