Yes, very much this. It wasn't just the banks, it was the insurance companies that funded the banks that started to look that they could go under. This is not "safe auto". These are subsidiary insurers of the investment banks. You had investment banks whom had hedgefunds making terrible and irresponsible funding decisions with derivatives. Then you had insurance subsidiaries backing the hedgefunds that were also within the investment bank. Then you had some hedgefunds shorting those first hedge funds.

Once the defaults started to happen, the investment banks kept desperately trying to prop up the whole system because they couldn't understand what was happening. It took them nearly a year to realize that their own hedge funds were selling bad products to their own bank, while being insured by their own insurer, who was being forced to pay out to their own hedge funds that had shorted the first hedge funds. Nobody figured out how completely incestuous their own trading schemes were. Places like Wells Fargo thought it was skull-fucking some poor idiot until they blew a load in their own mouth and went; "What the hell! How could I be eating my own penis?! My god who's hand is this!!!"