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The object of this paper is to identify some of the broad themes driving the current financial meltdown and the housing bubble that preceded it. Section 1 focuses on leverage, with special attention to three sources of trouble: no-money-down mortgages, over-leveraged investment banks, and the selling of credit default swaps. Section 2 looks at how flawed regulation and "Free market fundamentalism" contributed to the mess. Section 3 examines the recent environment of self-reinforcing fear, where excessive leverage has created extremely powerful downward momentum.
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