Some decent background stuff:

Fool's Gold by Gillian Tett. Tett gives a great background on the origins of CDO and CDS, and how CDO originated as an instrument of both regulatory arbitrage and a way to actually reduce systemic risk. Instead it became a way to leverage oneself to previously unthought of levels while infecting the entire system with systemic risk.

Tett is superb at explaining complex credit instruments and their effects in layman's terms. Her focus is on leverage and the big banks --- no real focus on the retail end of subprime. To my mind this puts the emphasis where it belongs. Subprime and the real estate bubble itself would never have been a system-threatening problem if not for the way the shadow financial system leveraged itself into bailout country.