Just how did we get into this economic mess? The answers are both complex and troubling. Blame greed, irresponsibility, lax government oversight, conflicts of interest and especially blind faith in a housing boom that seemingly had no end. But end it did, setting off a chain reaction that has left the economy in tatters and stuck the American people with the tab.

Thus far, the government has committed $1.75 trillion to buying or propping up a portfolio dominated by devalued real estate assets — and this may be just a down payment. The Obama administration has a new plan that will commit more government cash to rid the financial system of the toxic assets that have wrecked the economy.

Roots in an Earlier Collapse

The origins of the current crisis can be found in an earlier calamity — the collapse of the technology industry in 2000. The Federal Reserve responded to that downturn by lowering interest rates. Ideally, lower rates trigger more borrowing and spending, which in turn lead to economic growth.

In May 2000, the Federal Reserve’s federal funds rate — the rate banks charge one another for overnight loans — was 6.5 percent. By August of 2001, it was 3.5 percent. The Fed further lowered rates after the attacks of September 11, to 1.75 percent by December. By June 2003, the rate had been cut to 1 percent and the average monthly rate on a 30-year, fixed mortgage, according to a Federal Home Mortgage Corp. (Freddie Mac) survey, dropped to 5.23 percent, the lowest level since the mortgage buyer started tracking rates in 1971. And so everyone, it seemed, was looking to buy a home.

There is something of a myth surrounding the current economic crisis, how it unfolded, and the precise role of the world’s largest financial institutions in the global meltdown. That myth suggests these banks and investment houses were somehow surprised “victims” of unscrupulous subprime mortgage lenders, and that they could not have anticipated the damaging toxic assets that have so infected their balance sheets.

What’s missing from this story is the fact that this was a self-inflicted wound for which the rest of us are picking up a massive tab. The largest American and European banks and investment houses were not the unwitting “victims” of an unforeseen financial collapse, as they have so often been portrayed. The mega-banks not only invested in subprime lending institutions — they were the enablers, bankrollers, and instigators driving high-interest lending, and they did so because it was so lucrative and unregulated.

Worse, in many instances these are the same financial institutions the government is now bailing out with tax revenues. How these bottomed-out banks helped cause the financial meltdown can be clearly seen in a new study by the Center for Public Integrity. The Center ran a computer analysis of every high-interest loan reported by the industry to the U.S. government from 2005 through 2007, a period that marks the peak and collapse of the subprime market. From this pool of 7.2 million loans, our investigators identified the top subprime lenders. The “Subprime 25” were responsible for nearly a trillion dollars of subprime lending, or 72 percent of all reported high interest loans.

The stock market is in a tailspin after the U.S. government lost its AAA credit rating for the first time in history, raising echoes of the catastrophic Wall Street fallout three years ago.

But how did it all begin? Who were the key players? Where do regulators go from here? Here, we recount the Center for Public Integrity’s top stories on the 2008 financial meltdown and the subsequent market and government response.

Subprime mortgages underlying the road to financial ruin (May 6, 2009) – Just how did we get into this mess? Multiple factors have been cited: “blame, irresponsibility, lax government oversight, conflicts of interest and especially blind faith in a housing boom that seemingly had no end.” But fueled by subprime lending, the boom ended in bust. Borrowers took out too many loans they couldn’t afford, housing prices tanked, and by the summer of 2007, the subprime industry had all but disappeared because big banks had cut off access to credit. The government responded by promising to use taxpayer money to buy so-called “toxic” mortgage assets from banks so lending could start again. On Oct. 3, 2008, President Bush signed the $700 billion Emergency Economic Stabilization Act into law. Calls for increased regulation over the financial and housing industries would later yield stricter legislation.

Top 25 subprime lenders (May 6, 2009) – The top 25 subprime lenders accounted for nearly $1 trillion of subprime loans, about 72 percent of the high-priced loans reported to the government at the peak of the subprime market. The leader in lending was Countrywide Financial Corp, responsible for at least $97.2 billion, followed by Ameriquest Mortgage Co./ACC Capital Holdings Corp with at least $80.6 billion and New Century Financial Corp. at $75.9 billion.