The Credit Crisis: 'We're Nowhere Near the End Here'

One of the ironies is that mortgage-backed securities were supposed to shift risk away from lenders by pooling loans that were sold to investors, but they did not work that way in the crisis. "Risk hasn't really been shifted as much as we thought," Llewellyn said. "There is sort of a residual credit risk that is left with the bank."

That's because the contracts underlying the securities allowed investors to shift some responsibility back to individual institutions threatening them with insolvency, according to Joseph Mason, professor of finance at Drexel University's LeBow College of Business. What's interesting about this world and interesting about the business world in general is that contracts are made to be amended, if not broken," he said. "This was part of what investors were counting on....We're nowhere near the end here. We just have this lull. Some might call it a dead-cat bounce. I would say it's still the same cat."

But he also said the severity of the current crisis depends on one's perspective. His research shows that even homeowners who bought at the peak before housing prices fell in the 1990s would have earned a seven percent return yearly on that investment. That assumes, however, that the homeowner had cash to weather the crisis. Age also affects opinions. By historical standards, the current economy is hardly suffering. Unemployment remains high, and GDP [gross domestic product] is still growing a little. "I used to say that you have to be older than 37 to remember living through a real recession," Mason added. "Some of my colleagues say to me, 1991 wasn't a real recession. You have to go back to the 1970s. Now I think you have to be about 57."

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