How Did It Happen... Ben Stein's View
From my point of view, it all comes down to unacceptable behavior on the part of a lot of people. Yes, there are the mucky-mucks (a most apt name for the guys that did all the compression of mortgages into derivatives that Warren Buffet refused to invest in because he didn't understand them) that probably deserve and should be thrown in the slammer; and yes, there are the politicians who deregulated the banking industry in the USA so that these things could happen, particularly the renaming of mortgages into anything else but a mortgage so that the regulations wouldn't control who invested what amount in them; but there are also the folks who couldn't afford to buy a lot of the real estate that formed the basis of the derivatives, yet did, and have defaulted on them, while expecting to be bailed out... but that is my limited point of view... take a look at Stein's... Here is what he thinks needed to be done to create the mess on wall street:
1) Have a fiscal policy that creates immense deficits in good times and bad, burdening America's posterity with staggering burdens of repaying the debt.
2) Eliminate regulation of Wall Street and/or fail to enforce the regulations that already exist, instead trusting Wall Street and other money managers and speculators to manage other people's money with few or no regulations and little oversight.
3) Have an energy policy that disallows producing our own energy and instead requires that we buy energy from abroad, thus making our oil prices highly volatile and creating large balance of payments deficits, lowering the value of the dollar and thus making the problem get progressively worse.
4) Have Congress mandate that banks and other financial entities lend money to persons they know in advance to have poor credit ratings or none at all.
5) Allow investment banks, insurers, and banks to bet their entire net worth and then some on the premise that borrowers known to be improvident will in fact repay those loans.
6) Allow the creation of large betting pools called "hedge funds" that can move markets and control the outcome of trading, thus taking a forum for savings and retirement for families and making it into a rigged casino game that exists primarily to fleece suckers like ordinary working men and women.
7) Have laws that protect corporate officers from being sued for misconduct but at the same time punish lawyers in the private sector who ferret out such misconduct and try to make accountable the people responsible for shareholder and investor losses. If one of those lawyers gets particularly aggressive in protecting stockholders, put him in prison.
8) Appoint as head of the United States Treasury Department a man whose whole life was spent on Wall Street, who became fantastically rich through his peddling of junk bonds at his firm while the firm later sold short those same sorts of bonds.
9) Scare Americans into putting up $750 billion of their hard earned money to bail out the billionaires and their friends who created the market for loans to poor credit risks (The "subprime" market) and the unbelievably large side bets on those loans, promising that such a bailout would save the retirement savings of Americans, then allow the immense hedge funds to make the market crater immediately afterwards.
10) Propose to save the situation by surtaxing the oil industry, which is owned by our fellow Americans, mostly in their retirement plans, thus penalizing Americans for investing in companies that efficiently and legally produce an indispensable product.
11) Insist that the free market requires that banks and insurers with friends of the Secretary of the Treasury be saved but allow other entities not so fortunate to fail, thus creating total uncertainty and terror among financial institutions, and demolishing all of the confidence built up in financial circles since the days of FDR.
12) Then have the Republican candidate say he would keep on the job the Treasury Secretary who facilitated the crisis, failed to protect the nation from the crisis, got the taxpayers to pony up to save his Wall Street buddies, and have the Democratic candidate, as noted, say he would save the day by taxing the stockholders of energy companies.
There, that should do it.
Stein is a bit of a crank, but I think he hit some high points here... an interesting perspective...