The conclusions in a recent report on the causes of the financial crisis point the finger at the government. As reported in the Washington Post:

GOP members of the Financial Crisis Inquiry Commission pointed the finger at politicians in Washington for promoting lax mortgage lending standards that allowed lower- and moderate-income people to buy homes beyond their means.

Specifically, they wrote, the Clinton and Bush administrations turned mortgage finance companies Fannie and Freddie Mac, chartered by Congress to expand homeownership, into “two enormous monoline hedge funds” whose “only option available was to invest in mortgages of increasingly lower quality and higher risk to the taxpayer.”

George Mason University Professor, Russ Roberts, published a paper, called Gambling with Other People’s Money: How Perverted Incentives Caused the Financial Crisis, holding the government and Wall Street jointly accountable for their actions, in what had become an overly cozy relationship. His thesis is that:

…public-policy decisions have perverted the incentives that naturally create stability in financial markets and the market for housing. Over the last three decades, government policy has coddled creditors, reducing the risk they face from financing bad investments. Not surprisingly, this encouraged risky investments financed by borrowed money. The increasing use of debt mixed with housing policy, monetary policy, and tax policy crippled the housing market and the financial sector. Wall Street is not blameless in this debacle. It lobbied for the policy decisions that created the mess.

In his paper, Roberts provides the following evidence for his argument that the government and Wall Street are way too cozy with each other:

Wall Street helps write the rules of the game. Wall Street staffs the Treasury Department. Washington staffs Fannie Mae and Freddie Mac. In the week before the AIG bailout that put $14.9 billion into the coffers of Goldman Sachs, Treasury Secretary and former Goldman Sachs CEO Henry Paulson called Goldman Sachs CEO Lloyd Blankfein at least 24 times. I don’t think they were talking about how their kids were doing.

If you were hoping that the government had learned its lesson after the crash came down two years ago, don’t be mistaken. The details on the financial regulation were almost certainly heavily influenced by the about 150 ex-regulators who were registered as lobbyists as the financial rules were written last year.

Revolving door politics are continuing unabated, as exemplified by the recent career moves of Theo Lubke and Peter Orszag:

For the second time in two weeks a high-ranking recent U.S. public servant has traded a position of influence in the corridors of power for a massive paycheck working for an institution that owes its very existence to government largess.

This time it is Theo Lubke, who has transitioned smoothly from heading the New York Federal Reserve Bank’s derivative regulation effort to working for Goldman Sachs, where he can be expected to, well, help it do well out of regulation, current and future.

Last week it was Peter Orszag, who until July was the Obama administration’s Director of the Office of Management and Budget, joining Citigroup’s investment banking unit as a vice chairman. Several days before that Citi hired George W. Bush’s Commerce Secretary, Carlos Gutierrez, as vice chairman for its institutional clients group.

Public-private partnerships, as warm and fuzzy as the term sounds, should be taken as strong signals that trouble is ahead.  Regulated industries often capture the regulators, with regulations creating merely the appearance of the government acting on behalf of its constituents, when in reality, government and industry conspire to the detriment of taxpayers and consumers.