Every downturn is different and this one is no exception. That's why comparisons with previous downturns and meltdowns are meaningless. It also explains the growing number of analytic studies that are now emerging looking at what went wrong.

One of them, Deciphering the Liquidity and Credit Crunch 2007-08 by Princeton's Markus K. Brunnermeier is worth looking at.

What made his meltdown so distinctive, says Brunnermeier, is the way banks securitised the loans, repackaging them and passing them on to various other financial investors. The aim was to offload risk. Trouble is the banks were also financing their assets with shorter maturity instruments, or short-term money market funds, leaving themselves badly exposed when the money dried up.

Brunnermeier points out that the risk was perceived to be real low, but that was all a mirage because of the way it had been packaged and because of the way the banks had worked with ratings agencies to sell it as low risk.

"Because of the reduction of idiosyncratic risk through diversification, assets issued by these vehicles received a better rating than did the individual securities in the pool.1 In addition, issuing short-term assets improved the overall rating even further, since banks sponsoring these structured investment vehicles were not sufficiently downgraded for granting liquidity backstops.

"Moreover, in retrospect, the statistical models of many professional investors and credit-rating agencies provided overly optimistic forecasts about structured finance products. One reason is that these models were based on historically low mortgage default and delinquency rates. More importantly, past downturns in housing prices were primarily regional phenomena...In addition, structured products may have received more favorable ratings compared to corporate bonds because rating agencies collected higher fees for structured products. ''Rating at the edge'' might also have contributed to favorable ratings of structured products versus corporate bonds. While a AAA-rated bond represents a band of risk ranging from a near-zero default risk to a risk that just makes it into the AAA-rated group, banks worked closely with the rating agencies to ensure that AAA tranches were always sliced in such a way that they just crossed the dividing line to reach the AAA rating."

Brunnermeier also shows how the network effect of interest swap arrangements between the different institutions amplified the problem.

That could be overcome if there was some clearing house or central authority that knew who owed what to whom. But with the way these products were traded over the counter, it makes the prospect of that being established look less likely.