> problem in 2008 is correlated risk — basically, the difference between rolling once per mortgage (uncorrelated defaults) or just once that impacts all the mortgages (correlated defaults)

It was ignoring solvency != liquidity. Most of the structured mortgage products paid out fine. You really can skim cream off crap through payment prioritisation. But that was not clear ex ante. If you’re leveraged or in dire straits, that a security will pay as promised over the coming decade is little comfort when it’s going at a dime on the dollar.

The problem with the securities may have been correlated risk, but that didn't cause 2008. 2008 did not have a single problem, it had a lot of problems.

Yup.

-JUST- on the housing side you had Inflated assessments (A lot of places got in trouble for this in the aftermath,) a tendency to do ARMs and being unprepared for an interest spike, NINJA loans, and the general expectation by too many people (both securities handlers and homeowners) about correlated vs individual risk.

On the homeowner side, correlated risk and the subsequent drop in their home's value resulted in a good number of defaults, leading to a second drop in values (lest we forget the 'goodbye parties' some of these people threw in their temper tantrums on defaulting, a coworker of mine was able to buy one of those on the cheap but it needed a lot of repairs.)

We cannot forget however that general the whole populace, both citizen and corporation, were drunk on 'cheap' credit. (Which is my biggest concern about our current situation, I think some people still are.) When they were unable to refinance existing debt on terms as good as before, or rates on other lines of credit went up, it became harder to service said debt.

I can think of at least two cases where 'expansion' efforts in the age of cheap credit (In one case it was expanding a chain, in another it was launching a new line of business,) led to death spirals of the companies in question.