The Investment Bankers created so called " Synthetic Investments " thru a process that has come to be known as " Financial Engineering .
IE they " created " new types of Investments which were really based on huge bets on which way the economy and the markets would turn .
These so called Synthetic Investments were sold and resold . Then they went to the next step and " deconstructed " a given Synthetic Investment into it`s theoretical " Parts " and sold off the " Parts " to Institutional Investors such as Pension Funds , Insurance Companies and even Commercial Banks .
Few if any of the many Industry Regulatory Agencies could grasp what these investments really were or even spot them on an Investors Balance Sheet .
The " Biggest Bets " were created using highly risky home mortgages as the collateral or underlying investment . Eventually the music driving this unique game of " Musical Chairs " hesitated and then finally and suddenly stopped altogether and the entire financial system came tumbling down and down and down . Hence the huge bailout by the Gvt as an effort to avoid a deep bottomless World-wide Depression .