Stop me if you've heard this before. It's been around for ages. I keep getting asked to explain how this subprime crap works. Apart from explaining that Lurlene and Jethro, who've never had jobs in their lives, were able to get mortgages to move out of the trailer into a seven bedroom home, there's a slightly more complicated backstory to how this idiocy has happened.
This presentation, while very funny, is also quite a good explanation of how subprime has destroyed the economy. It also explains why we really shouldn't be bailing out the idiots who made this happen. In fact, it already provides a really good practical example for the Wikipedia Moral hazard article.
Update: Des sends this excellent Bird and Fortune video which also does a good job at explaining the mess.