
From 2002-2004 The Federal Reserve "fed funds rate" policy (see picture below) was artificially low encouraging banks to lend and the FED didn't raise the rates fast enough to prevent a credit bubble and reflect the true market risk. After the housing collapse the FED then began lowering rates again which was the partial cause of the first collapse. It was an attempt to prop up the markets but the damage had already been done. When rates are artificially low (say below 2%) it actually crimps credit because it doesn't reflect the true market risk. They got away with this the 1st time because the market hadn't busted yet but would have great consequences. Low rates also cause inflation in commodities because it weakens the buying power of the USD because commodities like oil are imported on the most part:

Each of the five largest investment banks took on greater risk leading up to the subprime crisis:

Gold Prices double between November 2005 - March 2008 and triple between November 2005 - April 2011. The most likely cause is artificially low rates that are set by the FED. Had people borrowed money to invest in gold instead of houses they would have tripled their investment.:


Hover over state to get foreclosure data - California is the worst by the looks of it:
California and Illinois are major industrial centers in the US are hit very hard by foreclosures.
The negligence in the housing market is extended to the government - debt creation exceeding all eras except for the world wars. This chart is Total Spending as a % of GDP(Gross Domestic Product):

National Debt as a Percent of National Income

Don't be fooled by Clinton. He signed a bill to repeal the Glass Steagall Act that deregulated the banks and may have been partially responsible for the severity of the housing bubble. This repeal allowed banks like Bank of America to gamble with the money people put in their checking and savings account like a hedgefund does. With the losses of the bets they either have to be bailed out or face bankruptcy.
Even if they don't go bankrupt they face a condition known as insolvency where the bank doesn't have the assets to cover it's debt obligations. Banks are greedy organizations that need to be regulated properly. The Glass Steagall Act was created because of the 1929 depression and it's rules designed to prevent another one. It wasn't too long after it's repeal that we had the great housing collapse and the great recession.

Sen. Carter Glass (D–Va.) and Rep. Henry B. Steagall (D–Ala.-3), the co-sponsors of the Glass–Steagall Act.
President Bill Clinton repealed Glass Steagall on November 12, 1999. The housing bubble peaked and burst in 2005 but Clinton looked like a financial genious while he was in office. Later the country had to pay deeply for his move to let the banks hold their own reins so to speak.
The onset of the economic crisis took most people by surprise. A 2009 paper identifies twelve economists and commentators who, between 2000 and 2006, predicted a recession based on the collapse of the then-booming housing market in the U.S: Dean Baker, Wynne Godley, Fred Harrison, Michael Hudson, Eric Janszen, Steve Keen, Jakob Brøchner Madsen & Jens Kjaer Sørensen, Kurt Richebächer, Nouriel Roubini, Peter Schiff and Robert Shiller.
Among the various imbalances in which the U.S. monetary policy contributed by excessive money creation, leading to negative household savings and a huge U.S. trade deficit, dollar volatility and public deficits, a focus can be made on the following ones:Commodity boom, 2000s energy crisis and 2007–2008 world food price crisis.