Yes, bankers contributed to this financial crisis. But a deeper analysis shows that it was the government that is responsible for the
bulk of the problems we are facing. See here for more information:

http://mises.org/story/3128

The roots of the crisis lie in both poor regulation and sheer unfettered greed. Lack of regulatory oversight naturally encourages such greed to run wild.

I note that the link goes straight to a site that sings the praises of the Austrian school. With much of their idealogy in ruins, neo-cons and market fundamentalists will surely keep arguing that the problem was not related to the free market which, if it were truly free would simply self correct this and any other problem (such a system can never exist as it would be far too disruptive and destructive). They can babble all they like but the world has already moved on to embrace a form of neo-Keynesianism, with the effective nationalization of large chunks of the finance system, trillions of dollars worth of stimulus packages being passed while other bailouts and takeovers seem likely.

As for Freddie and Fannie, I don't think they were compelled to give loans that they knew the client would not be able to pay back, simply to relax the terms of lending a little for social reasons. Far better than lending money would have housing trusts or comissions but in the US, such things have long been political poison as too many voters regard anything of the sort as "evil socialism". So governments were forced to look for market oriented solutions to problems like the working poor, created by loose standards in labour markets in the first place. It hasn't worked.

But nobody compelled the wall street boys to behave as they did.

Where are the neocons and their arguments around "it's not about lax regulation but the wrong regulation"?

Probably busy moose shooting to take out their post prime angst over the moral hazard they have created for themselves.

Or perhaps strangling themselves in the spaghetti of unravelled credit default swaps.

Most people are not greedy. Most are compassionate and most want to do the "right thing". It is worth reading http://www.amazon.com/Morals-Markets-Evolutionary-Account-Modern/dp/0230600972 to get an insight into how markets really work.

We need to adjust our economic systems to allow markets to function well. The problems of inflation, the mal distribution of wealth, the so called business cycles or instabilities in economies, our dependence on consumption, our current credit crisis etc. can be solved by a few relatively minor changes to the way we organise markets and in particular investment money markets.

The first adjustment is to distinguish between "new money" and "old money". New money is money that did not previously exist and is created to handle a growing economy. New money could be distributed to the people who put the least demands on resources and should be loaned at zero interest. However, the recipients of loans are obliged to invest their loans in productive enterprises that benefit all of society. Renewable Energy Plants, Public transport infrastructure, hospitals, schools, Universities, housing, roads, all come to mind.

It is important that the loans are invested through free open market places because market places give choice, allow failure and give us the best use of resources. Typically the areas where markets do not work well at the moment is public infrastructure and those are the first areas to tackle.

Read more at http://cscoxk.wordpress.com/2008/11/16/a-different-way-to-make-money-australia/

The details of how to encourage investment in different areas does vary but the same principles apply. Give control of new investment money to as many members of society as possible but ensure that the money is spent on productive infrastructure through market mechanisms.

And another of those elite media experts, who has patently failed to research the nuts and bolts, and as a result has got it all so wonderfully wrong.

Here is what actually happened:

http://www.onlineopinion.com.au/view.asp?article=8053

The more enlightened academics agree.

Fozz,

You have got to be joking. The Austrian school that you denounce has nothing whatsoever to do with the neo-conservative movement. Moreover, they predicted this crisis as early as 2003. Ludwig von Mises, a great Austrian economist, also predicted the Great Depression.