I posted this answer:
This is a very good question. It implies that we must distinguish between primary and secondary causes. That is the correct approach.
The government was the primary cause. The point is not to let bad-acting banks off the hook. But the role of private banks is a secondary cause. The fact is that the government is the only institution with the capability to spread bad lending and a huge housing bubble and infect the entire economy. Individual banks set their own standards. None can force them on others. Bad lending by an individual bank hurts that bank, and possibly the employees and customers directly associated with that bank. The government is entirely different. Its edicts transcend the diversity of individual bank lending policies via its massive, coercive central planning regulatory apparatus. It’s financial controls extend through the entire economy. So, bad government policy affects entire industries nationwide, and eventually the entire economy. As one who studied the crisis observed, “The Great Recession could not have happened without the vast web of government subsidies and controls that distorted financial markets.”
The 2007-08 crisis resulted from a perfect storm of government intervention geared toward carrying out the government’s deliberate “affordable housing” policies under the Bill Clinton and George W. Bush Administrations, both of which sought to raise the U.S homeownership rate. Don’t expect the political class and its statist allies in the press and academia to own up to their own culpability. They’re perfectly content to deflect blame elsewhere, mainly to private bank “greed” and the non-existent free market.
Jack Crawford recommended a good book by John A. Allison, The Financial Crisis and the Free Market Cure. I would also recommend Hidden in Plain Sight: What Really Caused the World's Worst Financial Crisis—and Why It Could Happen Again by Peter J. Wallison. A more condensed version of events is provided in an article by Don Watkins, FREE MARKETS DIDN’T CREATE THE GREAT RECESSION.
Related Reading:
The ‘Wild West’ of Government Regulation Caused the 2008 Financial Meltdown
The Nature and the Origin of the Subprime Mortgage Crisis—San José State University
Department of Economics
The subprime mortgage crisis had its origin in the program the directors of Fannie Mae initiated in the late 1990's to pursue social welfare goals rather than maintain financial viability.
The Housing Boom and Bust—by Thomas Sowell
2008: Who Really ‘Got Away With Murder?’
Altruism: The Moral Root of the Financial Crisis—Richard M. Salsman for The Objective Standard, Vol. 4. No. 1.
Why No Wall Street Prosecutions? The Villains Are All In Washington
Finally, Some Positive Recognition for the Statists' Favorite Whipping Boy, Wall Street
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