For those interested in parsing out the implosion, Tett digs down to its origins in a carefully researched account, guided by in-depth access to JPMorgan Chase(JPM) CEO Jamie Dimon and several of the members of the J.P Morgan team who developed the newfangled concept, which ultimately spawned collateralized debt obligations (CDOs).

She details how the investment strategy began innocently enough, then directs blame at how it was misused in the hands of other banks, including Merrill Lynch and Lehman Bros., who latched onto the concept and applied it to subprime mortgage loans, pushing immense amounts of mortgage loans into the formula under the auspices of a risk-free investment.

Tett’s reports that even as J.P. Morgan and a few other banks accurately saw that the housing bubble was bursting, and assessed the horrible risks of huge losses for CDOs, others such as Bear Stearns turned a blind eye to that information and boosted their business in the toxic-bound assets, despite warning signs.

Her J.P. Morgan sources begin by sharing backroom stories of how the exotic investment product was conceived on a rollicking summer’s weekend at the luxurious Boca Raton Hotel in Florida in June 1994. “It was in Boca where we started talking seriously about credit derivatives,” Peter Hancock, the British-born leader of the group recalls to Tett. “That was where the idea really took off, where we really had a vision of how big it could be.”

At the onset, the J.P. Morgan derivatives team was “engaged in the banking equivalent of space travel,” she writes. “Computing power and high-order mathematics were taking finance far from the traditional bounds, and this small group of brilliant minds was charting the outer reaches of cyberfinance,” Tett writes.

The swaps team was chasing derivative dreams and believed they were inventing a bold new way of generating returns. “There was this sense that we had found this fantastic technology, which we really believed in and we wanted to take to every part of the market we could,” Bill Winters, a senior member of the team, age 31 at the time, tells her.

The derivatives world is rife with complex jargon, but Tett brings it down to plainspeak as best she can. It’s unlikely that you will read the final chapter of this book and say, ‘Aha, now I know what went down.’ You will, however, have a better understanding of the underpinnings of the financial fiasco from street level.

Too, the players, from bankers to regulators, can be a little hard to track, but with patience, you can begin to piece it together. Tett offers two useful tools — an index to help you retrace who’s who and a glossary of investment terms in case you get tripped up by SPVs, SIVs and such.

Tett spends enough time with the tight-knit Morgan crew that you get a rare seat inside. This troupe is not a list of household names, but in the world of banking, they continue to garner respect amongst their peers.

The team included:

• Blythe Masters, one of the few senior female executives on Wall Street, who shot up the corporate hierarchy at Morgan and, at the age of 34, was named chief financial officer after the JPMorgan Chase merger in 2005.

•Hancock, who is now vice chairman of KeyCorp, a respected regional bank based in Ohio.

•Bill Demchak, who ran the core group within the brash swaps team championing credit derivatives, but left in 2002 to accept a position at PNC Financial Services in Pittsburgh, where he is senior vice chairman.

PNC is one of the winners in the crisis by Tett’s account, its losses “being dramatically smaller than those of its competitors, due partly to Demchak’s canny management of the credit portfolio.”

Not surprisingly, diehards such as Winters, who remains a JPMorgan Chase executive, still believe in the power of derivatives. “People are sitting around now and saying innovation is bad, that derivatives are a terrible thing, that credit derivatives should be banned,” Winters bemoans. “But really, this crisis is not to do with derivatives. It is about bad mortgage lending, bad risk management practices, how the innovation was used.”

Kerry Hannon is a freelance writer based in Washington, D.C.