What Caused the Financial Melt Down?

                Our treasury secretary Henry Paulson offered to save the banking system if Congress would only give him 700 billion dollars for him to purchase toxic assets, meaning bad home loans.  He asked for the money with no strings attached and remarkably congress gave it to him in two 350 billion dollar increments.  George Bush intended for Paulson to use 350 billion to shore up the system and then leave the other 350 billion for Barack Obama to deal with any issues in his presidency.  Somehow Paulson convinced Barack and George to turn the money over to him early so he could have all 700 billion right away.  When he took in the money rather than buying up assets he bought up a percentage of all the top banks in America and negotiated terms with them for heavy handed loans passed out by our government to the banks.  He never bought a single asset other than the banks themselves.  He used the money to fully fund these institutions which either were complicit in the deception or had no part in it and did not want to sell out to the government but were forced to.  Either way this is where we sit today.  Our banks are under the thumb of our government.  The corporations have all been vilified all though most had nothing to do with this melt down and the entity most responsible for the chaos, the government  is now taking ownership  of the banks.

                Why is the government the most responsible for this collapse?  Primarily they are responsible, for their complete lack of oversight of the pseudo government entities Freddie Mac, and Fannie Mae.  They refused to listen to regulators that demanded better oversight.  These companies were allowed to make ridiculously irresponsible loans and sell the loans in unregulated bundles to countries and companies all over the world with the US government giving their unofficial but very real backing to the product.  If the companies were private they would of simply collapsed under the weight of their own stupidity but because they were semi government entities they were given the backing of the American Tax Payer.  The people, who are now calling for regulations of our banking system, are the same people who were in charge of regulating Freddie and Fannie.  The reason AIG nearly died is because of Credit Default swaps or insurance policies they had written on companies that traded in these giant Mortgage bundles.  AIG was made out to be the bad guy by the media but their only crime was insuring companies that had long track records of success.  In hindsight it is easy to see they should not have sold those policies but can you really fault them for selling policies on companies that the government had loaned billions of dollars to and were invested in the safest investment known to exist at the time the Credit default swaps were written.

The following link is a political attack piece but it does demonstrate what went on.

http://www.youtube.com/watch?v=_MGT_cSi7Rs