In theory, when you invested, you loaned your money directly to a California homeowner secured by a deed of trust.

In reality, given that the borrower was paying 15 points on the loan, plus 24% interest, the loan hardly fell into a typical "secured" category. These borrowers were in fact taking out 3rd, 4th, and 5th loans on properties whose only "equity" consisted of paper value generated by mass phony appraisals done by or in coordination with a whole set of players who had a stake in keeping the game going.

When it all collapsed, people were observing how naive all those investors were to invest in something that sounded too good to be true.

It looks like our Wall Street wizards fell victim to the same impulse. This led to the bad assumptions that fueled their greed and to their ultimate demise.

Nothing new under the sun, said Solomon. It is all too true.