This is an overview I am working on...any thoughts are welcomed...

Problems:
• After the US Congress cut capital gains taxes (during the Clinton administration) on real estate, real estate prices in the US increased dramatically as real estate became a favored investment. This resulted in an unprecedented rise in real estate prices for approximately ten years. The growth went overboard and eventually resulted in over-inflated home prices.
• Clinton disabled the Glass-Steagall Act which had kept commercial banking separate from investment banking…and signed the Commodity Futures Modernization Act, which exempted derivatives (such as credit-default swaps) from federal regulation. His administration also enacted looser credit standards, putting additional pressure on banks to lend in low-income neighborhoods.
• During the same period, Congress (with pressure from community organizer groups such as ACORN – where Barack Obama served as a community organizer and assoc. lawyer) began to pressure banks to offer risky loans in an attempt to increase home ownership for the poor. Mortgage lenders were forced to lower credit standards. These loans were backed by Freddie Mae and Fannie Mac.
• Run by politicians, Fannie and Freddie fed the market with billions of dollars for loans earmarked for these risky loans to low-income people who would not otherwise qualify under historical standards of responsible credit-worthiness.
• Around 2003, Fannie and Freddie announced that their financial statements were unreliable. The Bush White House developed proposals to address the problem, but these efforts were shot down by Congress, specifically Chris Dodd and Barney Frank.
• Housing prices continued to rise and the bubble grew…Wall Street firms (looking to obtain higher yields on continued increases in home values) such as Bear Stearns and Lehman Brothers bought mortgages from loan originators.
• The bubble burst. Interest rates increased as home values fell sharply. This resulted in a glut of record foreclosures, leaving banks exposed.
• Numerous bank failures began as banks could not support the sudden loss of equity and cash flow. Government backed FDIC insurance was increased to $200,000 from $100,000.
• Standing banks began to freeze lending in order to hedge against risk. Many businesses are unable to secure loans for payroll and other purposes. Consumer loans also dry up.
• The US Auto industry and other big ticket sellers are hurt dramatically as consumers are denied credit by banks wary of potential failure.
• Consumer spending dried up as consumers developed uncertainty in the US economy. Many are pulling their investment money out causing further decline in the US Stock Market. The US Stock Market has declined to lows not seen in years.
• The US stock market continues its decline as Barack Obama, largely seen as anti-business is elected. The US stock market declines further on passage of the US “Stimulus Package” which is largely perceived to be high on “pork” (pet political projects) and low on “stimulus.”

Opportunities:
• There are numerous shorting opportunities as stock prices continue to plunge.
• As the US stock market reaches its bottom, potentially once-in-a-lifetime investment opportunities will arise.
• Future financial markets will benefit from better oversight as government agencies commit to preventing the mistakes of the past.
• Opportunities will arise to purchase goods at significantly below true value. The values of goods will increase as these investments increase. [More wealth was created during the 10 year real estate boom than ever before. While the last 18 months have given back many of the gains, there is still a net benefit…more wealth was created than lost.]
• Corporate and government waste and greed has been exposed and better oversight will result in more responsible and more efficient practices.
• As a historically cyclical phenomenon, the market will correct itself as it has before, most recently with the Dot.com bubble.