The sudden calls to regulate banks should be taken with a grain of salt.

Let’s remember now, the cause of this crisis was a sudden, dramatic drop in home prices, the likes of which we have never seen. For 100 years, home prices never dropped. Who would have expected them to drop 30 percent in 18 months?

All these “toxic assets” you read about would not be toxic if home prices hadn’t plunged. The rating agencies did their job. The insurance actuaries did their job. They studied historical data and used quantitative analysis to determine risks. They were just wrong.

To be sure, the dramatic increases in home prices over the last few years should have been a warning sign. But previous surges were followed by years of little or no growth, not a plunge off the cliff.

With huge amounts of surplus cash being generated by the Middle East and China, the money had to be invested somewhere. Experts believed that increasing liquidity would continue to cause hard assets to appreciate. It just didn’t turn out that way.

We have to have a villain. We just can’t accept the fact that we are human and cannot predict the future. Life is unpredictable and complex. Risk is a fact of life.

Our lead villain is the caricature of the fat-cat Wall Street banker hyping worthless pieces of paper (collateralized debt obligations) and laughing all the way to his summer home in the Hamptons.

Many of these folks are now unemployed and will be living off their savings from the glory days. Wall Street jobs are high-risk. You can get fired in a heartbeat. There is zero security. That’s one reason they make more.

Collateralized debt obligations allowed millions of Americans to afford cars and houses for the first time, generating substantial economic growth. That’s why Obama’s treasury department plans to spend a trillion dollars resuscitating this dead form of credit, which represents over half of all the credit in the country.

There is nothing inherently wrong with CDOs. The problem was the big banks that bought the CDOs failed to study the 200-page credit agreements that controlled the pieces of paper.

When home prices unexpectedly fell off a cliff, the banks needed access to the collateral (foreclosed homes) underlying the CDOs. What they found was a bunch of credit agreement legal mumbo jumbo that made it far more difficult to foreclose than a traditional house lien.

This realization caused residential CDOs to drop even more than the properties they represent, becoming worth just 20 cents on the dollar. Indeed, toxic assets.

Normally, this would be very bad, but it was even worse because banks had become super leveraged. The treasury allowed this because banks had purchased credit default insurance from the biggest insurance companies in the world. Forget our leverage, the banks argued, we’re insured! But what happens when the insurance company goes broke? That’s called “systemic risk.”

If this all wasn’t bad enough, the Financial Accounting Standards Board (FASB) created a new accounting rule called “mark to market.” That means when the CDOs dropped in value, the banks had to immediately write off the loss.

In the old days, the banks would just keep the asset on the books at the original cost, making everything look rosy and allowing them to better weather the storm.

We had a perfect storm, caused not only by market conditions but by government regulations as well.

Have no fear, the government is here. When it all comes crashing down, the government should and can step in, calm things down and sort things out. This doesn’t mean we are turning socialist. It just means our leaders are intelligent enough to understand that preventing a financial meltdown is a legitimate role of the federal government.

I believe in the free market. Always have, always will. The government interferes needlessly in innumerable petty ways. However, there are some situations in which I totally support federal intervention: world wars and global financial meltdowns would be the top two on my list.

We tried out the free market approach to a global financial crisis. We now call that the Great Depression. Yes, we are in the middle of the Great Recession, but it’s a cakewalk compared to the Big D.

Intervening temporarily to prevent a financial meltdown is a proper role of government. This does not mean that we should give up on the free market. If we handle monetary policy correctly, there will be no need for a new New Deal. Fortunately, we know a thousand times more about macroeconomics than we did 80 years ago. We have some brilliant minds working hard to resolve the situation.

We will learn from this, but the world is changing faster than our learning curve. We will make more mistakes. There will be other recessions. We are human.

Let’s keep an eye on the big picture: Technology is transforming the world for the better at breakneck pace. There will be bumps in the road, but the progress will be unbelievable. The blame game is just a big waste of time. Sure, we’re all sinners but what does that really have to do with the price of tea in China. And most importantly, we are not in control as much as we would like to think we are.