In the broadest sense, how did we get to the current economic crisis? This MeFi comment meshes with my general understanding:
The conversion of the financial system from wealth generation to gambling (aka wealth extraction) continues apace, to the point that they’re even backing gambling itself.
A large fraction of the modern financial system doesn’t create new wealth anymore. It’s not a factory that makes wealth; it’s a casino that extracts it from the economy, while giving little to nothing back. You can see it most clearly with the idea of backing gambling as an “investment”, but the system is full of ideas like these. A gambler creates no wealth, he just takes it from other players. Likewise, most hedge funds create nothing: they just take it from everyone else in the economy.
It’s now more profitable to manipulate other people’s wealth than it is to generate your own, so that’s where all the best and brightest minds are going — into taking whatever they can out of the economy, at your expense. Most of these are zero-sum games, and it’s the average citizens that are on the losing side.
Oh, and the Treasury.