Ninety-nine percent of the financial system's problems were caused by the repeal of Glass-Steagall. Glass-Steagall was the law that separated regular banking activities (taking deposits and making loans) from investment activities. In a bi-partisan act of insanity (90-8 in the Senate and 367-52 in the House), Congress overwhelming approved its repeal and Clinton signed it into law 1999. Huge mistake. That set the stage for an economic disaster that would have been impossible otherwise.
People keep saying this, but the activity that caused the financial crisis was mortgage lending, a core banking function. The proximate cause was excessive risk taking by lenders. Their foolishness was enabled by FNM/FRE, which were not part of Glass-Steagle, and aided and abetted by malfeasance by credit rating agencies, the worst of which, Moodys, is owned by Berskhire Hathaway, ie Buffet, a key Obama supporter. At any point, the Fed could have forced banks and lenders to dial back their risk taking but didn't. Similarly, the banks and investment firms could have used some common sense. None of the supposed reforms that have been enacted really get at any of these causes. Instead, we let the incumbent managements of failed banks retain their jobs and bonuses, and set a precedent for too big to fail, thus instituting moral hazard as oifficial policy.