Mortgage-backed securities and financing of sub-prime mortgages explained

There was an article in The New York Times by Jenny Anderson and Vikas Bajaj entitled "Soothing Words and a Stock Market Rebound" which does a fairly decent job of explaining mortgage-backed securities (MBS) that are used to finance many home mortgages, including how Wall Street itself participated in the financing of subprime mortgages using MBS bonds.

The real concern about subprime mortgages and defaulting on them is not the impact on the overall economy or posing a systemic risk to the financial system, but the potentially dramatic impact on the big Wall Street firms who have been heavily involved in the financing of subprime mortgages by underwriting MBS bonds and even keeping some of the riskier, and higher-yielding, bonds for themselves. I'm sure these big Wall Street firms will weather the storm, but some could be looking  at significant hits to their profits.

-- Jack Krupansky