Inside the Liar's Loan

How the mortgage industry nurtured deceit.

By Mark Gimein
Posted Thursday, April 24, 2008, at 11:25 AM ET

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Here's the narrative we've heard about the mortgage meltdown: miscalculation and unfounded optimism, clueless investors, cash-strapped home buyers clobbered by rate resets.

But there's one piece of the mortgage-meltdown tale that virtually every article or television program dances around without ever quite confronting. It's the simplest aspect of the crisis to understand and also the most troubling, because it's not about complicated financial dealings and can't be fixed with bailouts. It's about an astounding breakdown of social norms.

It's the story of the liar's loan.