Mortgage Crisis? What Crisis?

What happened, you ask? This is how I explained it to myself (a dummy), but I don't claim I have it completely accurately.

Well, banks made loans to people with poor credit, then transferred those loans to third parties who collected several such loans from several such sources. Then they made a package of such loans. Then they sold pieces of this package to 4th parties, each of which had some portions of some loans, or several complete loans, or many small portions of a few loans, or some portions of good loans and smaller portion of bad loans..you get the drift. The 4th parties had a promise to receive an interest rate commensurate with the quality of credit of the portion of the package that they had bought from the third party. Poorer the loan, higher the risk, higher the interest rate receivable (higher the reward). Now to put some faces to the arcane parties involved. People could be consumers, chaps who needed loans for financing homes, education etc. Original issuers of the loans (2nd parties) were consumer banks, mortgage companies etc. Packagers and Re-sellers of multiple such loans (3rd parties) were investment banks (like Lehman, Morgan and last-but-not-the-least Merrill Lynch). 4th parties could be any buyers anywhere in the world. Particularly, these could be large banks, hedge funds, sovereign wealth funds basically any "instituional investors" sitting on a pile of cash and needing to deliver high returns on it. Now in this supply chain, if the original debtor defaults, one can conceive of a ripple effect that ends up with a multitude of these 4th parties, which are far away from the US shores. And who really knows the extent of the effect? These portions of packages (knowns as CDOs in wall street parlance)have been sold willy-nilly to all and sundry. So we may make educated guesses as to the extent but that's really all they are.