I strongly recommend reading The Rise and Collapse of Wall Street’s House of Debt | The Agonist,
To understand the accelerating financial crisis that is afflicting various global markets you have to realize there are two credit creation processes at work in the world today. The first is the traditional one run by the central banks through the commercial banking system. This process has increasingly been shunt aside in the past ten years by a new credit creation mechanism run by the Wall Street investment banks. It is this new lending machine which is now imploding, and which threatens to impose severe economic pain.
The unwinding of the housing bubble takes us way beyond mortgages and into the financial markets of Wall Street. That’s why I titled this Today’s Housing Bubble Post. (By the way, it’s a generic title. We can have several Today’s Housing Bubble Posts on a given day.)
Reading this, iIt strikes me that it is describing a situation in which investors are borrowing to purchase these instruments, and to some extent the instruments are a repackaging of the loans that went to the investors tp purchase them.