Corrections without leverage will be ok.  When your financial institutions create billions of assets based around this leverage, then they fold, taking down a lot with them.  The correction would of pushed unemployment over 25% and looking at the stock market dropping to under 3000.  You could of had blood in the streets.  With the global interconnection of markets now, and all that, you cause dominoes to fall into place.  Causes the financial markets to get connected via Seagal-Glass being lifted played a part.  Banks offload mortgages that get bundled into securities that then go elsewhere.  Bad gets mixed with good, and then the formulas for evaluating risk are flawed due to bad assumptions.  And the entire thing melts down. When loans from all over the place get mixed into a single security, then you risk them all collapsing together, which is what happened.

Yes, things can correct, but how much blood are you willing to have in the streets to allow this correction, that could of possibly been prevented with more oversight.

There wouldn't of been leverage had they failed seperatly because they others would of self corrected. 

Also, we're talking about the same financial instiutions that spend their bailout money on executive bonuses?

But there was absolutely no way for them to fail serperately because of credit default swaps. 

Huh?  Credit Default swaps exist specifically FOR diversifying the risk to make it less risky.

Instead of having 5 loans in Las Vegas, you have one in LV, one in Chi, 1 in NY etc.

In an regular market, Credit Default Swaps makes things safer.

In regular markets, why does one need to have credit default swaps?  Looks to me, what you with what you suggest is form interconnections that make the downside of risk far larger, when the abnormal happens.  The problem is with irregular markets taking down the entire financial industry and causing the economy to go to a screeching halt as it had been.  Do you have answers for the large number of working people who lost their jobs, and have a hard time standing a chance getting work back, because of "well, in normal times, it is safer"?  Having incremental failing in normal times enables people to be able to find work.  Cascading failure that happens when you interconnect things, does not.

We've discussed this before.  But you and others that keep peddling this as the reason for the crash are far in the minority.  I can't say that you are definitively wrong because there are no certainties in economics.  But you are as close to definitively wrong as can be in economics.

not surprised, its all a front to make themselves and who they 'work for' appear better in the eyes of the people who ONLY get their information from one source (aka Fox News)

Not... really, everywhere i've read including the most liberal suggest it was the match.

It's just been an arguement over who was irresponsible the one who stored the gas their or the one who lit the match.

If there isn't going to be any sort of changes happening to prevent this from happening again in the future, who cares whose fault it is?  Is there some sort of magical scoreboard one takes confort in knowing they are right, even as they watch their entire life savings go up in smoke, and you are left at risk of losing your home, and either end up homeless or on welfare (welfare preventing you from being homeless)?  On top of this, anyone care to look at the original subject I posted about, how the GOP wants to ban the words "Wall Street" "Derivatives" and "Shadow Banking" from a report on this? 

How about there be a better form of existence, rather than trying to spin to say you are "right".  If things stink, and you are right about them stinking, they still stink.  The issue is to deal with the stink.  Does it matter what causes the stink, unless you are going to do something about it?

Reality:

* The U.S government did cheerleader too much for home ownership.

* The Bush administration did make lending standards even MORE lax than the Clinton administration.

* Fannie and Freddie do have blame in this also.

* Wall Street overextended itself in derivatives connected to this.  Did anyone hold a gun to their head and do it?  No they didn't.  I also think it is absurd to try to defend people who got too greedy, trying to keep up with the Joneses.

* People are suffering as a result of this.

Want to go on?  Anyone care, among the list above, pick out which one matters the MOST now?  How about people suffering as a result of that?  And how about having more than, "Golly gee, in normal times, this wouldn't of happened!"  Well, we aren't in normal times now.

You risk cascading failure when something VERY unusual happens to lower risk everywhere else. 

What do you say to people when something happens that was literally thought to be impossible?

I'm sorry, something happened that was literally thought to be impossible, by everybody... until like a year before it was going to happen.

I mean, what can be done about derivitives now?

Nothing.

Derivitives are worth more then 10 times the GDP of the world?  I mean, what do you think the effects of deflating that would be?  I can't see it being pretty.