Denver: So if the crash was "classic credit cycle stuff" why didn't all of the government geniuses simply shore up the bad loans? Why did GM need a bail-out? Why did the States need cash? Further, are you asserting that GSE's such as Freddie and Fannie had NO hand in the crash? If so, you really have NO clue.***
GSEs played a small but destructive role. Most of the bad loans were from Wall Street, though.
In a sense, the GM bailout was nothing but shoring up bad loans. So that was part of the process. But more fundamentally, the stimulus was about the Federal government allocating funding to state and local governments, which were obliged from a statutory perspective to maintain balanced budgets, despite plummeting revenues.