The banking crisis explained in 3 paragraphs.

The government regulated and backed the banks. The banks customers were lulled into complacency and didn't have to bother to evaluate, monitor and control their bank's actions because of the government backing and regulation.

Then the government basically CREATED and grew the mortgage securitization market with GNMA, backed them up, gave the impression that all was well and they were on top of it. Then the government didn't regulate the market and then blamed the "REGULATED" banks for the crisis. These banks were "at fault" for aggressively buying and selling for a profit the products the government created. But the truth is if someone creates a marketplace where things can be bought and sold for a profit with no risk, it MUST be anticipated that people will buy and sell the things and earn money from them without regard for the risk. It is human nature, and company employees are human.

Now the government is taking advantage of the crisis created by GNMA and regulating more and more and deciding what banks are "too big" and too risky for society. It wasn't the banks' fault. It was the government's fault. It's the GOVERNMENT'S regulations that are too big and too risky and cause ultra-homogenization -a lack of diversification- in the economy that is "too big to fail"... and the government's regulations did fail. The banks (and the mortgage recipients) were just the willing participants in the game ultimately created by Congressional and Presidential policy, and the policy was the same in both parties.
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