The paper uses Minsky’s Financial Instability Hypothesis as an analytical framework for understanding the subprime mortgage crisis and for introducing adequate reforms to restore economic stability. We argue that the subprime financial turmoil has deeper structural origins that go beyond the housing market and financial markets. We argue that inequality has been the real structural cause of today’s financial markets meltdown. What we observe today is only the manifestation of the ingenuity of the market in taking advantage of money-making opportunities at any cost, regardless of macroeconomic and social consequences. The so-called “democratization of homeownership” suddenly turned into record-high delinquencies and foreclosures. The sudden turn in market expectations led investors and banks to reevaluate their portfolios, which brought about a credit crunch and widespread economic instability. The Federal Reserve Bank’s intervention came too late and failed to usher adequate regulation. All attempts to stabilize financial markets will be temporary fixes if the structural inequality problem is not adequately addressed. Finally, the paper argues that a true democratization of home-ownership is only possible through job creation and income generation programs, rather than through exotic mortgage schemes.