The Housing Bubble

The economic recession we're now in, didn't simply happen. As far I can tell it all started with a market bubble, a helluva alotta deregulation, and a perverse incentive for investors and banks to find money schemes instead of making solid financial decisions.
So here are my three points:

1. A housing craze hit the country in mid-2000s. People who couldn't afford houses wanted to buy them, because it would be the "best investment they could make." And those that already did put way too much stock into them, literally. Overvalued house prices and increased home ownership progressively made the real-estate bubble bigger, and yes eventually the bubble did burst.

2. Ever since the Reagan administration came up with the concept of "Reaganomics," every single presidential administration has implemented some form or another of deregulation, including the Clinton administration. Essentially Reaganomics is a very laissez-faire concept; it states that the markets work better if they are unfettered by government intervention and regulation. This implementation of deregulation gave banks and businesses much more leeway on what they could do.

3. So if a bank wanted to finance a mortgage for a person who wasn't really qualified to buy a house, it could. If that same bank wanted to give that person a mortgage with a variable interest rate, i.e. a sub-prime mortgage, it could. And if that bank wanted to basically masquerade that mortgage as a reliable source of capital, since it had no damned government regulation in its way, it could.