I think sub prime mortgages are fine in principle provided that they are rated appropriately for the people who want to invest in them. My understanding is that the core of the problem before was that the ratting companies were essentially in the pocket of their clients, the banks, leading to a totally fraudulent system! The financial markets were unwittingly investing money in bonds that were far riskier than the ratting companies were claiming. Had the whole system not been (still is!) so fraudulent the market pressure would have forced the banks to reduce the number of sub prime mortgages b