For once it's not Bush's fault

Anyone that starts screaming about how this nice little financial mess we find ourselves in was caused by Bush is an idiot. The seeds of this collapse were sewn in the early post-war era with the creation of the Fed, the FDIC, and the creation of all the Federally insured mortgage companies because 'everyone should be able to own a home'.

The Fed sets the percentage of a bank's deposit that must be held on hand at any time. The rest of the money may be lent out for the bank to earn interest on. Because banks, and other Federally insured operations, have the insurance of the FDIC they are protected if they become insolvent. Now, these financial institutions all pay the same rates to the FDIC for this insurance regardless of their performance or risks. This allows banks to be as reckless as they want with how they loan their money out, as they will be covered by this insurance if they fuck up. So what you have is no discouragement to these people to make lots of risky investments that have the potential for high returns. As many other mortgage brokerages did in recent decades, they made a habit of giving out very risky mortgages that would lead to really good returns if there was no default on the account. Because of this, housing prices were artificially inflated which led to riskier loans and so on.

Fast forward to today, where all these risky investments are going south. Now everyone looks for the Fed to bail them out. Keep in mind that the FDIC only has enough money on hand to cover $50 Billion of the $1 Trillion of insured assets. So the government is subsidizing restructured mortgages for people (tax-payer dollars), nationalized Freddie and Fannie which shifts liability for these companies to the taxpayers, the FDIC pays out for the insured accounts, and the Fed has to come to the rescue when all else fails to keep these companies solvent. That usually means the Fed (the "Lender of Last Resort") allows the insolvent bank/firm to offer tax-free bonds, which the Fed then buys with newly printed money (inflation). Through all of this, the people that suffer are investors and tax-payers, while the owners of the banks/firms are shielded from too much, if any, loss. And this is happening across the board in all financial industries right now.

The one sane proposal I have seen to remedy the horrible way our system is setup is to make payment into the FDIC insurance protection fund entirely based on the firm's risks in their investments. You pay more if you perform more risky lending. It would probably be the simplest way of regulating the whole thing.

Then of course there's the issue of continuing to support the Federal Reserve, an entity that does not answer to Congress but prints money at its leisure. (Note: It is unconstitutional for anyone but Congress to coin money) However, the issue of central banking and the crooks that created the idea is for another day.