The stock mar­kets are bleed­ing red today. Lehman Broth­ers has gone BK, even though it nev­er had a quar­ter­ly loss as a pub­lic com­pa­ny until this past June. The finan­cial sys­tem is a com­plete mess.

How did we get into what Alan Greenspan has called a “once-in-a-cen­tu­ry” finan­cial cri­sis? Let me refer you back to an episode of This Amer­i­can Life (“The Giant Pool of Mon­ey”) which we fea­tured ear­li­er this year. (Lis­ten here.) Step by step, the show traces in its trade­mark, enter­tain­ing way how this cred­it deba­cle took shape. Along the way, you’ll dis­cov­er how 70 tril­lion dol­lars of glob­al mon­ey need­ed to get parked some­where, and it found the US hous­ing mar­ket. As the mon­ey poured in, the Amer­i­can invest­ment com­mu­ni­ty cranked out as many mort­gages as it could. And when there were no more qual­i­fied home buy­ers left, the banks start­ed low­er­ing lend­ing stan­dards until there were none left. In the end, even dead peo­ple were get­ting mort­gages (sad­ly, a true sto­ry). Give the pod­cast a lis­ten. The whole deba­cle gets pieced togeth­er in a way that you’ve prob­a­bly nev­er heard before.

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