Why the Current Economic Mess? Summary Explanation

The core of the issue started with the government's desire to broaden the home ownership in this country. The belief was that certain minorities were at an unfair advantage and the playing field needed to be leveled.

This was done at multiple levels by both parties. The Fed also fed into this housing bubble by keeping interest rates too low, too long.

The banking industry really didn't like these new loans and found ways to get rid of them, they sold them in whole or in part and also looked to insure them. As the housing bubble continued, greed no doubt took over. There was money to be made. Entire companies were made and prospered selling essentially junk paper all of it was 'backed' by the government.

They banks were greedy and the banks were stupid but they didn't break any rules, no amount of oversight (which there was and is still plenty) would have affected things because the government goal of increasing home ownership was being met.

The basic rule of banking is to have a certain amount of assets backing what you are lending, those rules have been lessened (by the government) but we still within reasonable limits, if and ONLY if you assumed those assets were stable like cash. The fact that much of the asset base was based on home values which were at the top of a huge bubble was a system destined to crash and crash hard.

Words of warning did start going out in 2005 and 2006, the Bush administation itself tried to enact more regulation and oversight as it started to see (better late than never) the problems brewing. They were shut down, because of the false belief that were just trying to keep the poor folk from owning homes.

The administration should have yelled louder, Congress should have listened in the first place, big banks should have been so stupid and greedy and individuals should have been more cautious and not gotten into something they couldn't afford.

When the entire system breaks down, it is impossible to lay the blame on one thing, one man or one party. This was a problem in the making for over 20 years.