Re: The root cause was that the politicians FORCED the banks to make bad mortgage loans
No, the root cause was that the bad debt which was encouraged at many levels in the extremely multi-tiered system for buying a house in the USA was bundled into packages and these bundles became an investment end in and of themselves.
Here is some food for thought: In a system where mortgage brokers take a commission every time a mortgage is taken out, where does the incentive lie: in selling a house once in a given period of time, or in selling it many, many times in the same period?
Now consider the case of balloon payments. What factor do you think was foremost in said brokers' minds when pushing people to sign paper for which they couldn't possibly muster the dosh in the long term?
I'm rather closer to this nasty business than some here, and those pointing to group X (most popular are politicians, next the home buyers) are underestimating the incentivization issues that permeated and still permeates the home market.
The debt is the point these days, not the eventual settlement of it. That is why there is another crash waiting in the wings when holders of impossibly large student loans start defaulting. Their debt is also being bundled and traded around.
The situation with credit card debt (another bundled investment vehicle) got so bad that there was a popularization of the actual predatory nature of the business in the mid 90s and people, finally, got educated. Banks were told in no uncertain terms to stop sending pre-approved credit applications to debtors because they were not only making the problem worse by the hour, but were opening massive ID theft opportunities for the less lawful. After the crash they finally did stop, for a while, but I think it was because someone did a cost benefit analysis rather than an outbreak of sudden-onset ethics.
Faced with a record wave of personal bankruptcies brought on by impossible credit card debt, King George the Second reacted with firm and swift leadership and ... changed the law to make it much harder for a person to declare bankruptcy (but corporations were still able to avoid their liabilities with ease).
With leadership like this it is no wonder that the ship of state staggers from one iceberg to the next while everyone runs about asking what happened to all the lifeboats.