It shouldn't be too surprising that blaming the government for the current financial and economic problems is so popular. It's quick, it's easy, and it doesn't require the vast majority of citizenry to take a hard look at their own conduct.

Sure, the government did give Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) an implicit guarantee when they set them up, and they likewise pushed lenders to lend to the less credit-worthy chunk of the country. And the Federal Reserve, which may not be a government body, but acts in the public's interest just like the government does, pushed interest rates to extremely low levels in response to the recession following the Internet bubble -- levels that many say were well below what the market would have otherwise set.

But none of these things can really be said to have caused the problems; the most we can really say is that they enabled the problems. After all, as we look at the various colors of this rainbow of terror, we can attribute a lot of the dunce-cap-worthy actions to the private market. For instance, the government did not:

  • force mortgage brokers and banks like Washington Mutual to offer mortgages at outlandish terms.
  • force home buyers to snap up homes from builders like Centex (NYSE:CTX) and Ryland (NYSE:RYL), despite sky-high prices.
  • force buyers to lie on mortgage applications.
  • force investment banks such as Morgan Stanley (NYSE:MS) and Lehman Brothers to securitize mortgage assets using unrealistic assumptions (such as the idea that home prices could never fall).
  • force ratings agencies like Moody's (NYSE:MCO) and Standard & Poor's to blindly assign high ratings to these assets.

And of course, this list could go on and on.

Now, to say that enabling all of this to happen is the same as causing it to happen is paramount to saying that economic agents, individuals, the market -- call it what you will -- have a natural propensity toward irrational action and these kinds of crazy bubble-ups. By extension -- and this will really get the free market folks fired up -- this would say that what's needed here is more, or at least simply more intelligent, government regulation. Not as so many want to argue, a wholesale retreat by the government in financial and economic affairs.

Further financial Foolishness:

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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. The Fool’s disclosure policy has never once been caught with its pants down. Of course, it doesn't actually wear pants …