The government not big business deregulated the banks and blow hards like barney Frank helped to lead that charge and yes part of the argument for doing so was that it would makes it easier for underserved groups to get loans.
I agree with what you said, about the government screwed up when they deregulate the banks. The government is also partly responsible for the 2008 unwinding. I can get in the why and the how they screw up but I don't have time or energy for a 2500 word post explaining all the details. Short gist of it (trying to keep it at 500 words), is that capitalism works best of all forms of markets for almost always it is the best exchange of information, price is a signaling mechanism, and with prices we can get the best use of resources.
Government screwed up for by deregulating some areas of the economy and refusing to regulate other areas they didn't allow the best exchange of information. The reason why the 2008 "unwinding" is so much worse than the tech bubble of 98, was not the extent of the bubble but the fact we didn't know who owed people what, and the extent of the bubble wasn't known until the bubble was popped due to the complexity of the financial instruments. We didn't know who owed what. There has to be a point that when a financial instrument is so complex that you do not know what is inside it that you can't consider it a safe asset, but instead a risky asset with a high reward to risk ratio. But instead the government was brain dead at the wheel. We should not have allowed CDO to act as insurance and thus consider those assets as safe for the point of capital requirements. We also should not allow AIG to offer what was effectively insurance with the CDO without a requirement of having minimum capital to pay the claims.
Effectively Wall Street created the bubble, it was them who went drunk at the wheel in search for profits.
The Government screwed up for it allowed bad laws which hid information and did not maintain capital rules.
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Effectively I think it of it like this, Wall Street is your Junior kid in high school (so lets say 16). He has been stressed lately due to high school and fear of college. Your son also has poor impulse control and he unwinds by mentally getting away escaping his problems. Your son is creative and bright, and when he puts his mind to things has a real talent at art and writing. He also has a history of making bad decisions, you understand why he has made bad decisions and you two are working on it, but still his history is his history.
You are about to go out of town, leaving him home alone for you trust him. You trust him so much that you didn't think of the 48 cans of beer that you have in your fridge and your garage.
Your son decides to have a fun night with his friends, and drink the beer and accidentally totaled the car. There are injuries but luckily no one died and everyone eventually will heal.
Ultimately your son is the main person at fault in this situation. He is old enough to make adult decisions. He will be going off to college in less than 2 years. Yet it is still your fault for putting your son in such a situation.
