Mistakes abounded in the last decade as the private banking industry, enabled by the government, did what it usually does, lent money at a profit to citizens who were driven to ride the real estate value wave. Private citizens were witnesses to the growing bubble as we all saw real estate values in California and elsewhere continue to rise about the level that most working American could afford. Did you not say to yourself at any time in the last 5 years, "...how much higher can real estate prices go?" Could we not all predict this outcome at some point? It is a given that many average Americans hold most of their net worth in their home and some used their mortgages as an ATM to fuel spending beyond their means. We were all witnesses or victims to excesses of the last decade.
So where does this go now? Well, Government stimulus is channeled to the banks to underwrite the bad paper and free currency to promote business growth and create jobs to get capital flowing again. The capital flows to citizens who are now saving more. Their savings go back to the banks that are reluctant to lend to risky ventures. As well, the federal government is promoting banks to loan to the government with low interest rates to cover the growing deficits. This is making less capital available for the private sector to grow.
Many economists are not optimistic about the 2nd half of 2010 where another downturn is expected. As the stimulus money runs out so does the modest economic expansion that we are experiencing now. Congress will begin discussions about a second stimulus in 2010 but don't expect this to be called a "Stimulus". That would be unpopular in an election year. As government continues to grow unabated, watch the energy of a populous revolt take shape and carry into the congressional elections.