What ticks me off the most about the subprime mess is that I know what would have happened if regulators had actually had the foresight (or desire) to stop it. It would have gone something like this:
Mortgage companies start offering interest only, neg am and stated income loans to people with out the means to pay for them. "Sure we can get you into a house, it's the American dream and don't worry when your teaser rate is up, just refi everyone does it"
Regulators (Fed, Thrift supervision, whoever). "um that's not a good idea, if you want to keep doing that, you're going to need to not give neg am to people with too low a income or DTI, or you can only sell off X% of the loans, so you have some skin in this game, " or whatever appropriate regs would have helped reduce this catastrophe.
Mortgage company (To public, repeated by Fox. etc).
"We, the mortgage industry want to see everyone in a home and have loan products that would allow even working class people achieve the dream of home ownership, but the regulators prevent us from offering them. They are the ones clogging the gears of the free market and preventing you from getting the home you deserve. Government messing with the free market is hurting the working man under the guise of protecting them. blah blah blah"
As it happens, the regulators couldn't be bothered, but the next time around when banks or insurance or mortgage or pharmaceuticals or some conservative complains about govt messing with the free market, keep the subprime crisis front and center in your mind. Because this is a classic example of what happens when the govt doesn't act.