I agree with libertarians that the current crisis was instigated in large by various political pressures to make bad real-estate loans. I fear, however, that making such loans might well have continued on its own logic without the pressure. I do not see a suitable correction mechanism that would tend to fix the problem on an appropriate time scale.
The sub-scenario that I see and fear is when two populations of securities arise and compete. One population is founded on mortgages made with effective protection against bad loans on property whose value is less than the current value of the agreed payment plan — in other words loans with inadequate collateral. The other population is like the first except without this protection.
The second population will yield greater returns over decades. This is the time span of reputations of financial agents. Agents recommending speculative and dangerous assets will show greater returns and attract customers. Conservative agents, will disappear along with the sort of investment they provide according to Darwinian logic. Some conservative old institutions will adapt to survive in the short run but then fail when crisis strikes. (Natural evolution sees this phenomenon.) Perhaps the indirect investment instruments were successful not for their real risk amelioration, but because they obfuscated the fundamental risk. Individual investors could make the difference but most of them are not in a position to tell the difference between these categories. I trust their common sense but not the information that was available to them. They could rely on professional advice, but that is exactly what they were doing with their financial advisers.
In short it looks to me as if the tinder was there and politics merely ignited it.