So let me point you to Shocking Fraud from Financial Scum from Good Math, Bad Math. It turns out the best explanation I've come across is from a science blogger.
An earlier and just as useful explanation of the sub-prime mortgage mess comes from two comedians - John Bird and John Fortune. Here's a video explaining the Subprime Banking Mess. What's amazing is that the reason they propose for why a bailout is necessary was not actually used. I almost expected politicians to use it to explain the need to spend billions on people and companies that created the crisis that stole billions.