Why The Mortgage Crisis Happened

Here is a rather lengthy and detailed history of how government involvement in the mortgage and financial industries in the United States created the current crisis, from IBD Editorials, starting with the creation of Fannie Mae in the 1930s. It is pretty obvious to any reader that it wasn't "the free market" or "deregulation" to blame, as neither was present. As author M. Jay Wells writes,

Contrary to the Obama narrative, however, free-market capitalism is not at the root of the current mortgage industry crisis, but rather the very socialism he hawks. The historical record makes this fact unmistakably clear....

The narrative is of another failed socialist experiment, this time a massive federal effort imperiling the whole U.S. banking industry.

For more background information check out Megan McArdle's reading list on Asymmetical Information and Russ Robert's podcast on EconTalk.