Government deregulation and failed regulation of the commercial and investment banking industries were important contributors to the subprime mortgage crisis. These included allowing the self-regulation of Wall Street's investment banks and the failed regulation of Wall Street rating agencies, which were responsible for incorrectly rating some $3.2 trillion dollars of subprime mortgage-backed securities. The introduction of new mortgage products by the Alternative Mortgage Transactions Parity Act (AMTPA), passed by Congress in 1982, ended the long standing practice of limiting banks to making conventional fixed-rate mortgages. Approximately 80% of U.S. mortgages issued in recent years to subprime borrowers were adjustable-rate mortgages. Fannie Mae and Freddie Mac also carry blame. The two GSEs purchased over $500 billion dollars in high risk Alt-A mortgage products, which they had previously classified as too risky for purchase in the 1990s. Both Alan Greenspan and the SEC testified before Congress that the shadow banking system was not effectively regulated, even though it had become nearly as important as the regulated depository banking system in providing credit.

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