True, but under Bush's regime the markets were intentionally de-regulated which led directly to our current crisis. The free-marketeers blindly believed that an untested system of no checks and balances could work, which I don't think it can because of human greed. Obviously the housing crisis and greedy banks and uninformed borrowers also did this, but out boom/bust system no longer works.
A truly, or even attempted free market doesn't work.
Em, the direct cause of the crises was government inteference.
HUD forcing Fannie mat and Freddy mac to purchase loans for people to buy houses they couldn't afford and then the Democrats of the Senate Banking comittee prevented any serious regulation of them occuring (on partisan lines to make it even worse). The government forced two semi-private groups to do something that made no commercial sense, but then refused to take the responsibility for dealing it. The market loved every second of it and sub-prime loans, which should always have been a fringe sector, came to dominate almost all of the commercial vehicle's sold on. CDO's became glutted and with retrospect, high risk, but at the time... these were instruments backed by two of the most respected mortgage finance firms, both federally chartered. What could go wrong?
Sub-prime was always a mugs game, but the logic that the higher interest you could recieve for high risk makes logical sense and is still the basis for nearly all buisness deals. The problem was that the governments own acts lowered the percieved risk allowing the sector to expand far beyond where it should and allowing the toxic debts to filter up the food chain.
In a true free market subprime would have never expanded beyond the small fringe sector it was. But political pressure to open up housing to poorer groups and the lack of politcal will to deal with the fallout (made worse if the donations Freddie and Fanny made are taken into account) meant that a deeply uncommercial system became embedded and within roughly 3 years shattered the market. Now we're in an even stranger time when some companies are supported and others aren't seemingly on whim, failure is unpunished, but the reward for loyalty is to get stabbed in the back (look at the AIG execs who stayed on and tried to work through the crises... on nominal pay only). Corportism has replaced the free market as the dominant way of thinking.
Free market capitalism has many sins and does require some regulation. It helped set up the dominoes so they tumbled as they did. But the group who flicked that first one over and set off all the rest was the state going for political points.
Economics doesn't follow a 5 year election cycle. Politics, by its very nature does. Economic theory is all about thinking about situations long term, whatever school you follow. Politics prevents long term thinking... which is one of the reasons governments were so unprepared to deal with this.
Whether it was right or wrong for the government to step in and do these bailouts is still up for debate. Looking at it through economic terms I'd suggest not, but we're still in the woods. Japan using a similar plan had seen both the good and bad sides of huge bailouts. But on practical terms allowing the banks and finnancial institutions to fail would be crippling... as would allowing the Detroit 3 to fail in one go (and the millions who are dependant on them for work), both causing huge human suffering.
But the US government (and others to an extent) cannot wash its hands of this crisis and its causes and blame it all on the evil free market and those heartless capitalists. It wanted to play politics with the economy... and it lost. Badly.