"Very poor decision making by financial insitutions and poor supervision of their operations have been at the heart of the financial sector woes. The problems affecting these financial institutions come from two basic sources: 1) very weak credit standards, mostly in mortgage loan originations and 2) high leverage of some financial instiutions’ balance sheets.

IndyMac was a poster child for lax origination standards. It was the biggest "alt A" mortgage originator. (An Alt A mortgage has either little to value ratio-or a combination of these issue.) Why lenders thought these loans were a good idea, much less the even lower quality subprimes, I will never understand. Subprime mortgage originators like Countrywide put together mortgage pools that were quite risky at the onset and are now experiencing high default rates".  

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http://www.mwboone.com/library/articles/Credit_Crunch_7_31_08.pdf