Wikipedia: "A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public. Pyramid schemes are a form of fraud."
Something like: I get an email encouraging me to send $5 dollars of my money and 1/2 of everything I get from forwarding the email. It sounds good: as soon as I get more than 2 people forwarding the email and sending me $5 I break even. Money flows up the pyramid. The earlier I am in the chain letter the more $$ I get back. But then the thing runs its course and people who are last in the chain send their $5 but cannot find anyone to reply to their email. The people at the bottom are left holding the bag.
Now, it looks like this is what happened with housing prices...
Easy credit from banks resulted in housing price growth. This resulted in lots of cheap "debt" being bundled and exchanged amongst the investor class. This led other banks to further extend loans to people and tell them that it was a safe loan because the price of housing would always continue to rise. The debt was re-bundled and re-packaged and re-sold with values further inflated by the rating agencies. The "promise to participants" may have been undocumented hyping of how this was a great time to borrow money on your house or (up several levels in the pyramid) a great time to invest in some hedge fund.
I am pretty sure that all reeks of pyramid scheme. But the actual payment of money was not done at first but delayed through amortization of the loan payoffs. Ironically this left the people at the top of the pyramid holding the bag. That means, all things being equal, that the people who created the fraudulent scheme were in exactly the right position to be punished for it. It is a crime.
So here is where our banker-run government tilted the playing board so far that they tipped it upside down. They paid of the banks and have been supporting letting them off the hook so they can continue to go after the people at the bottom of the pyramid scheme - the home owners.
Why does anyone call this a "free market"?