Bloomberg, via The San Jose Mercury News, has the tidiest summary of the subprime lending fiasco I’ve read yet.

It’s full of great quotes.

On the ripple effect: “The magnified losses caused by derivatives made it possible for a small number of defaulting subprime borrowers to freeze world credit markets.”

On the basic miscalculation, part one: “From 2001 to 2006, as U.S. home prices rose 50 percent nationally, owning the debt and guessing that borrowers would keep current paid off. Since July 2006, however, when housing supply began to outstrip demand…”

On the basic miscalculation, part two: “‘These are loans based on the borrowers’ ability to refinance rather than the borrowers’ ability to repay,’ Einhorn said.”

On the banks’ incentive to make bad loans: “If the borrowers defaulted, the bankers still got their fees.”

On the subprime derivatives market: “Investors didn’t know what they were buying.”