As I said before, both Republican and Democratic administrations dropped the ball on regulating the financial industry. That failure allowed unethical practices to become the norm:
Commercial Banks (as opposed to Investment Banks) made loans that they knew, or certainly should have known had they done any verification at all, were bad. They didn't care because they collected fees for initiating the loans, then packaged them as Asset Backed Securities and/or Mortgage Backed Securities, and sold them for additional profits before the any of the loans became a problem.

There's evidence that ratings companies knew that the ABSs and MBSs they were rubber stamping as AAA were far too risky to deserve that rating, but they were unregulated and the Commercial Banks paid them for good ratings -- they basically had a license to print money.

Investment Banks and Funds Managers bought the securities, which most of them knew were risky, but AIG was selling cheap "investment insurance" (Credit Default Swaps) and as long as home prices continued to skyrocket, people could sell their homes for a profit instead of defaulting on loans that they couldn't pay back -- particularly if their loan had a low introductory rate so that they could make small payments for the first couple years.

AIG was hugely over-leveraged, but housing prices will keep going up forever, right (after all, the one thing they ain't making more of is land)?

Politicians of every stripe wanted to encourage home ownership, so they weren't going to do anything to upset the apple cart. Not only were they not going to regulate this wonderful new economic engine that just goes up and up forever, they relaxed enforcement of existing regulations.

Then, an overheated housing market stumbled -- there were more houses than buyers, prices declined, people found themselves upside-down on their home loans, when they began to default (because they couldn't sell and pocket "free money" as they used to, because they owed more than the house was worth, if they could even find a buyer), which made those ABAs and MBAs "toxic" as the bundled mortgages went into default, and AIG couldn't cover the volume of losses.

There's plenty of blame to go around, but I think Republicans (with whom I more closely identify than Democrats) were marginally more at fault. My decision was based on the economy, coupled with an idiotic war in Iraq (Saddam was a bad piece of work who oppressed his people, but I care far less about that than that he counterbalanced Iran) and a bungled war in Afghanistan -- when troops would have been most effective at blocking the border to Pakistan, they were pulled for Iraq. Coupled with erosion of personal freedoms and human rights abuses in the name of security. So... I voted for Obama, not because I agree with his policies, but because I disagree with what has become standard Republican dogma. I'm not saying that I believe he'll do a great job -- I really don't think anyone could recover from the problems he inherited, but I think he'll do less harm in the long run than "staying the course" would.