Once those irritating systemic regulations such as Glass-Steagall that required separation of function among financial institutions and prevented the formation of financial oligarchies were removed, people immediately began using their new freedoms in a manner consistent with their self-interest. This was no different from what they had done before, and is fully consistent with human nature.
The problem was that now self-interest, instead of being exercised within a system that tried to look to the long-term health of the financial system, was exercised within a system redesigned to promote short-term expedients that bolstered gambling and speculation, favored concentration of financial power, and fostered incompatible functions and contradictory end goals. The "Greater Fool Theory," in which enormous profits are made by luring in new "investors" to the real estate market and other ponzi schemes governed the financial world.
Everything went along swimmingly until the speculative bubble that sustained everything started to implode. This happened when it was discovered that the assets underlying the massive amounts of derivatives either didn't have the value assigned to them, or didn't even exist.
Most people will immediately think of the Madoff scandal when the latter case is mentioned. They fail to realize, however, that the United States government is far more guilty than Madoff of issuing paper with nothing behind it, to the tune of more than $10 trillion. Compared to what the federal government has managed to pull off, Madoff is a piker.
What the federal government has done is undermine the fact that the derivative we call "money" necessarily has production and productive capacity as its underlying asset if we want to enjoy the benefits of a sound currency and stable economy. Since 1917 however, due to a loophole in the Federal Reserve Act of 1913, the United States government and the Federal Reserve have been circumventing the structural, internal regulation embodied in the Act designed and intended to prevent the federal government from being able to "capture" the central bank and use it to monetize its deficits.