Here's an excellent piece by Thomas J DiLorenzo on who really got us into the credit mess – American politicians and regulators.

The Community Reinvestment Act 1977 didn't just force lenders to make bad loans to 'sub-prime' borrowers. It stopped banks making any business decisions that would prejudice this shaky market. The Act also funded 'community' – that is, advocacy – groups to make sure that the banks knuckled under. The lenders knew it was all daft, so to spread the risk, lenders like Freddie Mac 'securitized' their loans in a big way – spreading the infection around the planet.

In 1995 the authorities 'streamlined' the working of the Act by pressuring the banks to carry on making bad loans – telling them not to pay too much attention to tradition creditworthiness tests, and ruling that a borrower's participation on a credit-counselling was proof enough that they could repay a mortgage, which the banks then had to give.

Rising house prices and economic prosperity, fuelled by low interest rates (Federal Reserve again), disguised this craziness for years. But now all those sub-prime borrowers are defaulting big time. And politicians are blaming the bankers!