Much of the financial crisis was created by thousands of banks and loan officers throughout the country. It was getting more important to originate loans and then sell them to others. The more loans originated, the more money the loan officers and their banks would get. They didn't have to worry about risk because the buyers of the loans assumed the risk. Because the loans were packaged and sold again, the end buyers had no idea of the risk.
One of the ways to originate more loans was "stated-income". Either the borrower was allowed to state any income needed to get the loan or the loan officer encouraged the borrower to overstate the income. The actual income was not verified in either case.
See "I Worked For A Major Mortgage Company, And What We Did Was Criminal", Michael David White, Business Insider, 2010-04-22.
Many think that any action by government to curb excess is interference in the "Free Market". Would any professional sports team play without referees and umpires? I doubt it. All the teams of a league pay into a pool to pay for the leagues referees and umpires. Managers and players may complain about individual decisions, but doubt they would like to settle any disputes themselves.
Let's think about government as a referee in the sport of business. One branch of government sets the rules. Another, independent, branch of the government enforces the rules. A third, also independent, branch settles disputes about the rules. Corporations and individuals pay taxes to support government as a referee.
What would the "free market" be like without these systems of rules? Would Apple go to war against Palm if Apple felt Palm was infringing on its patents. Would the Beatles and their fans go to war against Apple because the Beatles felt Apple was misusing their trademark?
And what about individual citizens, should the "free market" be allowed to defraud, maim, and kill people in the name of bigger profits? With no recourse to their government for the citizens to redress these grievances?
There is no easy answer to what is too much government and what is too little government. We have too many people thinking that all government is taking the "people's freedom" away. And we have too many people thinking that government is not doing enough to protect the "people's freedom" from "rapacious corporations".
