Capitalism did NOT cause the financial crisis.

Despite what many individuals (most of whom have no idea what they are talking about) and some pockets of the mainstream media, capitalism and free market did NOT cause the financial and housing crisis. In short, there is a great deal of government involvement in our financial sector and the constant meddling caused the bulk of this crisis. Without Fannie and Freddie buying up large swaths of CDOs (a collection of risky, non-risky loans), banks would not be so willing to sell these loans off in such a hurry. Of course Fannie & Freddie would not have operated on massive 60 to 1 leverage margins, had it not received an implicit guarantee from the government to be bailed out. When organizations that hold half the mortgages are called GSEs (Government Sponsored Enterprises) do we really have a free market system? No, we have institutions operating in ways they were never intended to operate, causing other banks to over leverage (like Bear Sterns) and subject themselves to massive risk for the sake of competition.

Anyway, to truly explain the underlying reasoning behind the collapse of our financial system and to thoroughly understand why government involvement is the death knell for even the mightiest of countries, watch the following video from John Allison.

John Allison is chairman of the board of BB&T Corporation. He began his service with BB&T in 1971, became president in 1987 and was elected chairman and CEO in 1989 (serving as CEO until the end of 2008). During Mr. Allison’s tenure, BB&T has grown from $4.5 billion to $137 billion in assets.

Link to the video: http://www.aynrand.org/site/PageServer?pagename=reg_ls_financial_crisis

Note: This is about 1.5 hours, so if you are truly interested in learning and understanding, it will take some time, but I promise you it will be worth it.