The problem with the housing market is that people used their houses as an investment - not just a place to call home and stay permanently.
At that point it's just an
extremely highly leveraged investment, ie little equity and a lot of debt. You can do that with stocks as well, except the people who got no-downpayment mortgages would never qualify for it. The issue is that nobody in the legislature looked at the macroeconomic consequences of allowing such highly leveraged investments.
So while each individual is responsible himself for getting foreclosed, the effect of large scale foreclosures is something congress has to accept blame for. It's not unreasonable to require a downpayment of 10%-20% so that the person buying the house has a stake in it as well.
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Also, please take note, the federal reserve is an independent CORPORATION and is not an actual part of the Federal government.
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You should take a look at the history of central banks (not just in the US) - there's a very good reason why it is this way in a lot of countries. (and should be that way in every country) People who set monetary policy can never be elected officials or be at risk of losing their jobs for their decisions. A central bank needs to be independent of the politics, or it stops being effective.
Just imagine if the President could set monetary policy. Since a lower interest rate means cheaper mortgages and easier access to credit and lower rates, there's no way economics would beat politics in the decisions.
