I have not read Mr Allison's Book yet, but I concluded that the predominantresponsibility belonged to the Government back in 2008. There are several other events/facts that are rarely mentioned which really expand the evidence against Uncle Sam:
The ratings agencies that 'certified' the MBS', CDO's and CDS' that hid the true risk associated with the various debt instruments are a government-created cartel. Fitch, S&P and Moody's are the only SEC authorized rating agencies. Since they have no competition, is it at all surprising that the value and accuracy of their rating's are poor to say the least?
Second, the sheer existence of various government entities (Fannie, Freddie, FHA, VA, etc.) which underwrite mortgages has introduced significant "unseen" (per Bastiat and Hazlitt) moral-hazard without even considering the "seen" implications of the CRA.
Back in the 1950's and 1960's the vast majority of mortgages were privately held. When one wanted a mortgage one would go to a their local bank or S&L. That loan would in most cases be held by the same local financial institution for its lifetime. At that time the norm was 20% down-payment and a 30 year mortgage with a fixed or variable rate on the balance. When the local loan officer recommended approval of a loan, it was with the understanding that the risk associated remained with the local institution. Everything about the loan; the interest rate, the credit of the mortgagor, amount, etc., were determined based on risk.
Over the years since then, watching the government takeover of larger and larger portions of the mortgage market, we see the growth of mortgage brokers who did not hold the loan. They simply pass it on and make their living solely based on commission. Risk was no longer the primary driver. Now the qualification standards of the various government organizations were the main criteria of loan approval. The qualification standards in turn were primarily determined by politics. Countrywide's "Friends of Angelo" program; The CRA pressure on various lenders to increase approval rates; The political pressure brought by Clinton and the Bushs' on the various HUD Secretaries to increase the percentage of loans underwritten by the Government, etc., are just symptoms of the moral hazard created by the simple existence of Fannie, Freddie and the rest.