Basically, there are two explanations that are given for the 2008 crash: the Democratic one, which says that Wall Street was deregulated and ran wild with frauds that cheated both the people who signed to trick mortgages and the people who bought the fraudulent mortgage-backed securities; versus the Republican one, which says that there was too much regulation in order to get poor people to buy houses they couldn’t afford, and so Fannie Mae and Freddie Mac ran wild with insuring or even buying mortgages to the poor, who basically ripped off the system and so caused the crash.

You can see both of these two main contesting theories in the final report by the Financial Crisis Inquiry Commission, where all 6 Democrats voted for, and the FCIC published, a report that found the cause in deregulation (see the chapter there, “Conclusions,” placing the blame on deregulation of Wall Street) and where 1 of the 4 Republicans, Peter J. Wallison, from the far-right American Enterprise Institute, dissented (see the chapter there, “Dissenting Views by Peter J. Wallison”), and Commissioner Wallison found the cause to lie in over-regulation of Wall Street and in poor people taking advantage of preferential treatment that was (supposedly) being mandated by Democratic policies from the Federal Government. (Wallison lobbied hard to get the other 3 Republican Commissioners to sign his dissent, but they refused. They instead wrote their own joint-dissent – “Dissenting Views by Keith Hennessey, Douglas Holtz-Eakin, and Bill Thomas” – that blamed nature for the bust phase of a supposedly inevitable boom-bust cycle of capitalism: they blamed nature, or capitalism, itself.

They essentially shrugged their shoulders, and declined to sign either onto the standard Democratic line, or else onto what soon emerged to become the standard Republican line. Those Republicans basically presented the viewpoint that the Obama Administration has offered. Obama, Geithner, Holder, Bernanke, Obama’s SEC, etc., have all adhered to the inside-the-Beltway mainstream Republican explanation for this collapse, that it was what the Republican Alan Greenspan had called the “irrational exuberance” phase of capitalism, notwithstanding that Obama calls himself a “Democrat.”

The actual Democratic viewpoint, which was expressed by the 6 Democratic Commissioners – who were appointed by Harry Reid and Nancy Pelosi – has not been followed by this Administration, but neither has the far-right viewpoint, which was expressed by the AEI’s Peter Wallison.)

In popular culture, the most extensive presentation of the Republican (or AEI) theory is the 2011 book Reckless Endangerment, from New York Times reporter Gretchen Morgenson, with Joshua Rosner. There is no better presentation of that theory, because the theory itself is false; this book is simply its most extensive presentation, and so it drew a huge audience of Republicans, since no other writers even attempted to present an extensive narrative to, allegedly, back up the Republican account, which even the mainstream Republican Commissioners had refused to endorse – it’s so crazy. The theory is just Republican Party propaganda, directed at a Republican audience – nothing more than that.

In popular culture, the most extensive presentation of the Democratic theory is the 2010 documentary film Inside Job, from Charles Ferguson, and then in the same author’s 2012 book, Predator Nation.

Readers can see a rather full public discussion and debate regarding the Republican theory, in the more-than-a-hundred (as of this time) reader-comments after the lead review (which is a glowing five-star review) of the Morgenson-Rosner book that is at amazon, the “Comments” there concerning the review from Srikumar S. Rao.

Nothing more will be said here about the Republican theory, the theory that blames the poor (and Democrats) for the economic collapse, inasmuch as anyone can readily pursue both Wallison’s and Morgenson’s presentation of it on his own, and see the extensive take-downs of Morgenson’s presentation of it that are presented in the “Comments” following Rao’s rave review of it.

Here, then, is a summary of the Democratic explanation for the 2008 collapse, the actual sequence of events that led to the crash, as was documented the most extensively in Charles Ferguson’s Inside Job and Predator Nation. The following summary is very dense, and thus must be read slowly in order for it to be understood (since it encompasses a lot of ground, in very few words):

The dozen largest banks wanted to turn mortgages into bonds which could be sold to investors, because such securitizing of mortgages would vastly increase the bond markets and thus the top bank executives’ fees (including bonuses) selling this vastly increased number of bonds. Securitizing mortgages was magic for Wall Street: it produced more product for them to sell. And the mega-banks needed these “derivative securities markets” to be unregulated in order not to protect the buyers of these bonds (i.e., not to protect them against fraud). If the bond buyers were to know what was in those “investments,” they wouldn’t buy them.

The goal here was to maximize the number of bond-sales, not to produce investment income to bond-purchasers. Moody’s, S&P, etc., were paid by these mega-banks to AAA-rate these bonds without checking to see whether the “borrowers” were capable of paying their mortgages; this was necessary in order to enable the vast increase in mortgages that was required in order to maximize bond-sales and thus bank fees.

Companies like Countrywide Mortgage were motivated to sell as many mortgages as possible, regardless of borrowers’ ability-to-pay, because these mortgages would, in any case, be sold off to mega-banks, which in turn (as soon as the given mega-bank paid for the AAA-rating) promptly sold them to investors (mainly pension funds, etc.), who would be left holding the bag at the end, after Wall Street had “earned” its fees.

Exploding the number of mortgages meant selling mortgages to people who previously rented instead of “bought,” and this necessitated luring poor people to sign mortgages they couldn’t possibly pay, nor sometimes even read. So, with these AAA bonds, “investors” wouldn’t know that they were actually buying toxic assets, and would be left holding the bag at the end, once Wall Street got its fees and “homeowners” were dispossessed by banks.

“Borrowers” wouldn’t know that the dream which had been sold to them, of their “owning” a no-money-down dream house, wasn’t actually to provide them a good deal on a house, but to maximize fee-income to the mega-banks which stood behind this vast Ponzi scheme, which was operated not just by the banksters, but (since the Glass-Steagall Act had to be tossed, and derivatives had to be unregulated) by people like Phil Gramm and Larry Summers, who strong-armed through the deregulatory policies that would enable these banksters to heist investors and to walk off into the sunset with billion-dollar fortunes, once Bush-Obama-Greenspan-Bernanke-Paulson-Geithner-Hubbard-Summers-Gramm retired onto corporate boards and enormous speaking fees, after having squeezed the juice out of the “borrowers” and the “investors” (and, ultimately, out of future U.S. taxpayers, since the bailouts were intended to bail out the investors in these looted mega-banks themselves – unlike the “investors” in the toxic bonds which those mega-banks marketed). (Mega-banks were left with the relatively small portion of the toxic assets that were still in the pipeline once “the music stopped,” and so the bondholders and stockholders in the mega-banks were the actual aristocratic investors who would have lost money if they were not bailed out by future U.S. taxpayers at the end. These aristocratic investors got bailed out; investors in their toxic mortgages did not. There is a big difference.)

This Ponzi scheme demanded, at its start, unregulated derivatives markets, and vast increases in mortgage-advertising; and, at its end, too-big-to-fail banks, so taxpayers would bail out any aristocrats who owned bonds and stocks in the now busted mega-banks.

The whole scheme was a vast siphoning operation, from everybody, to the aristocrats. After the fact, the aristocracy (via their agents such as Wallison and Morgenson) explained it to the American people as having been a “heist” by the poor, and by their liberal enablers, against everybody else, entailing not the absence of regulation, but the presence of regulation: “over”-regulation. (Fox “News” constantly trumpeted that lie.) This myth was in keeping with Reagan’s lie: “Government is not the solution to our problem; government is the problem.” (Of course, that comment by Reagan was true in regard to any dictatorship, but it wasn’t generally true of America until he became President. Until that time, America was a democracy, not a dictatorship, but he set in motion the “libertarian” trend into fascist dictatorship.)

Authoritarian liberals deny that banksters (and their agents in academia and in the media) ultimately caused the crash. On 22 June 2011, the authoritarian liberal Ezra Klein blogged at theWashington Post “What ‘Inside Job’ Got Wrong,” and he said that “the documentary looks at all the people who got it wrong and asks how they possibly could have missed a crisis so obvious.” He lied about this documentary. The documentary was actually about the incentives – little changed by Obama – which had produced mega-corruption in government, Wall Street, and academia.

Klein missed the fact that this film was about how a criminal society functioned and led to a massive siphoning operation from outsiders to insiders. One of the reader-comments posted after Klein’s blog-post closed appropriately, “Ferguson got it exactly right about your beat, Ezra. You are wrong.” Klein remained wrong, because he covered for the aristocrats who were robbing the public – he refused to report their crimes. So, he presented the economic collapse as having resulted from merely blunders. He saw regulation as being necessary in order to avoid blunders by aristocrats who handle huge sums of money, not in order to avoid crimes by aristocrats who handle large sums of money.

Like many liberals, Klein assumed that values are irrelevant, that everyone acts from self-interest, and that government is just a system to oversee the inevitably conflicting interests so as to achieve some mechanical “equilibrium,” a peace that might be attained as much by deceiving the losers as it is by informing the winners. In such a world, victims are nothing but interests to be served, just as victimizers are. Losers are merely being punished for being weak or stupid, and winners are superior to losers because winners are strong and smart.

This attitude ran Wall Street. (It also ran the Obama White House.) A lower-class version of it was reflected by a Reuters news report on 24 November 2011, headlined “Burglar Abuses ‘Dumb’ Victim in Apology Letter.” The convicted burglar was ordered to write a letter of apology to his victim, and he wrote, “I have been forced to write this letter. ... But anyways I don’t feel sorry for you and Im [sic] not going to show any sympath [sic] or remors [sic],” because, “I’m not bothered or sorry about the fact that I burgled your house. Basicly [sic] it was your own fault anyways [sic]. I’m going to run through the dumb mistakes you made.” Here, he simply assumed that if everyone locked his doors and windows and weren’t so “dumb” as to live in “a high risk burglary area,” then crime wouldn’t be profitable and so there would be no crime; crime is nothing but an act of opportunity.

For this burglar, only power-relationships mattered, and his victims were weaker than he and therefore deserved to be robbed by him. Robbery was their punishment for being “dumb.” This was the same attitude that reigned at the TBTF banks (except that fraud was the punishment of their victims), the attitude of the banks that Bush/Obama had bailed out with U.S. taxpayer dollars: According to this power-worshipping view, the American public deserved to be robbed by Wall Street, because Wall Street was smarter and stronger than the public.

This was the libertarian view of things, and it reigned on Wall Street (the financial center) in NYC, and on K Street (the lobbying center) in DC; it didn’t reign only in “a high risk burglary area”; and it was accepted at media such as Fox “News,” whose audiences accepted the “invisible hand” and assumed it to be the hand of God, The Almighty, not of any crook. Among conservatives, everything was a power-game of some sort, usually a con-game.

On 29 June 2010, Bloomberg News bannered “Banks Financing Mexico [Drug] Gangs Admitted in Wells Fargo Deal,” and Michael Smith reported that Wells Fargo had admitted that Wachovia Bank, which it had recently bought, laundered $378.4 billion for Mexican druglords. “No big U.S. bank – Wells Fargo included – has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again. Large banks are protected from indictments by a variant of the too-big-to-fail theory.”

Banksters were too big to prosecute, in George W. Bush’s and Barack Obama’s Amerika. “‘It’s the banks laundering money for the cartels that finances the tragedy [of the drugs-trade],’ says Martin Woods, director of Wachovia’s anti-money-laundering unit in London from 2006 to 2009. Woods says he quit the bank in disgust after executives ignored his documentation. ... Woods and his colleague Jim DeFazio, in Charlotte [HQ for Wachovia], say they suspected that drug dealers were using the bank to move funds. ... Woods, 45, says his bosses instructed him to keep quiet and tried to have him fired. ... DeFazio says, ‘I didn’t want anything from them. ... I just wanted to get out.’ ... Wachovia Chief Executive Officer [throughout the money-laundering] Kennedy Thompson ... now works for private-equity firm Aquiline Partners LLC in New York.”

There were no penalties to Mr. Thompson (a Republican, and a contributor to the John McCain campaign against Obama), other than his being forced to quit Wachovia. He left with an $8.7 million retirement package from Wachovia. He was still a Board member at Hewlett-Packard and other firms, and a Trustee at Wake Forest University and other nonprofits. Crime paid – handsomely – but only when it was the right type of crime, the type that has no real penalties in a fascist country.

This news story also reported similar drug-money-laundering settlements by Bank of America, Western Union, and other major political donors. Although the United States imprisoned a larger percentage of its population than any other nation, that was only for non-aristocrats. Aristocrats would, at most, have their corporations pay wrist-slapping fines, and there would virtually never be anything worse, such as a penalty that would subject the aristocrat himself to imprisonment, or even to a fine.

The only time when the government would come into the picture, for them, would be to bail them, or their corporations, out (with taxpayers’ money) – supposedly so as to get these aristocrats to hire people, boost employment, be “job creators,” and so to let some of that taxpayer cash trickle down to the masses whom they employ. This was called the American system of “Justice.” It was basically similar to the “justice” in other banana republics throughout the world. Calling such a nation a “democracy” is an insult to all democracies. Fascists despise democracy and so like calling such a country “democratic”; they say that the U.S. remains a “democracy.” Then they complain against “mob rule” when they don’t get 100% their way, politically.

Ultimately, the Bush-Obama approach, the Alan Greenspan approach, perpetuates the same worship of the powerful and contempt of the poor and weak, that the Peter Wallison, AEI, myth promotes. Not only is it false, but it impoverishes future generations of Americans, and weakens our democracy.

Charles Ferguson, and the Democrats on the FCIC, documented what caused the 2008 collapse, and we are now heading for another. Yet again, the mainstream Republican view will be that it’s just the downside of “irrational exuberance.” The fact that each of these cycles causes the rich to get richer while the poor get driven even further into economic desperation, is inconsequential to Obama and other mainstream Republicans.

As for the Republican electoral base, who get fooled by people such as Peter J. Wallison and their fellow-travelers in the press, that constitutes simply the “right” or “conservatives” that “moderate politicians” such as Obama negotiate with, in order to keep the nation sliding further downhill, while the aristocracy grab an ever-larger proportion of the economy that they collectively destroy in this fashion.

This is where we are heading as a nation: caught in a vise between “moderates” such as Obama, and “conservatives” such as AEI and the Tea Party. “Liberalism” has become a dirty word, and progressives are ignored altogether.

Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.