The subprime meltdown was caused by investment brokerages who were left free to do what they wanted with Bush appointed business cronies in the SEC. They pushed out money to be loaned by any means necessary - including no money down, no proof of employment, no credit check, all you need is a pulse. Why the high demand? A form of financial engineering called securitization, which allowed many mortgage lenders to pass the rights to the mortgage payments and related credit/default risk to third-party investors via mortgage-backed securities (MBS) and collateralized debt obligations (CDO). Corporate, individual and institutional investors holding MBS or CDO now face significant losses, as the value of the underlying mortgage assets decline. How did this happen? Economist Robert Kuttner has criticized the repeal of the Glass-Steagall Act as contributing to the subprime meltdown.

1. This act had since 1933 eliminated Conflicts of interest characterize the granting of credit – lending – and the use of credit – investing – by the same entity, which led to abuses in 1933 (Great Depression remember?).
2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent was limited by the act to ensure soundness and competition in the market for funds, whether loans or investments.
3. The act kept banks out of the securities business. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.
4. The act made sure deposits and liabilities did on get out of balance. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).

Why was it repealed by the Republican Congress in 1999? So it could be replaced by the Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, which allowed banks and insurance companies to do it all, investments - grant credit - lend - and use credit; which led to abuses and the fix we're in today. Who led this charge of Deregulation? Gramm? That's right, Phil Gramm: Mr. “nation of whiners” who is still advising McCain on economic matters. Senate Democrats Voted Against it 39 to 1 Senate Republicans voted it for it 44 to 1 McCain's vote on Gramm's bill - Yea.
Sources:
http://www.govtrack.us/congress/vote.xpd?vote=s1999-105
http://dyn.politico.com/members/forums/thread.cfm?catid=1&subcatid=1&threadid=1431191&start=1%A4tPage=1
http://www.dailykos.com/story/2008/9/16/203823/008/1013/601053

This great act was followed by the "Commodity Futures Modernization Act of 2000" The Bill was slipped in and rammed through both the House and Senate without any debate. The way the latter passed was extraordinary: 262 pages of dense language slipped into an 11,000-page omnibus bill on the Friday before the Christmas recess. This act is widely known for creating the so-called "Enron Loophole," which exempts most over-the-counter energy trades and trading on electronic energy commodity markets. The "loophole" was drafted by Enron Lobbyists working with senator Phil Gramm seeking a deregulated atmosphere for their new experiment, "Enron On-line" which helped bilk millions of dollars from California utilities customers. "The act freed complex derivatives from any regulation," said Michael Greenberger, who served in the Commodities and Futures Trading commission in the late 1990s. "It set the stage for the present mess and the problem is, no one knows how many of these instruments are still out there or who holds them."

http://www.forbes.com/reuters/feeds/reuters/2008/09/22/2008-09-22T093623Z_01_LM718012_RTRIDST_0_COLUMN-USA-REAGAN.html

Several Democratic Legislators introduced legislation to close the loophole from 2000-2006 but were unsuccessful due to Republican control of the House and Senate. Who led this charge of Deregulation? Gramm? Again, Phil Gramm, about whom John McCain said this on Jan 18, 2008, “I love him dearly. On issues of economics and ... family values, there's nobody that I know that's stronger.” Gramm and his wife were big friends of Ken Lay (died just before HE WENT TO JAIL); he collected more than $97,000 in campaign contributions from ENRON. Wendy Gramm was on ENRON’s board and was paid between $915,000 and $1.8 million in salary, attendance fees, stock options and dividends for helping ENRON implode. Do what’s right for your country and your children – send McCain back to the Senate and Obama to the Whitehouse!