Who really caused the market collapse?

A little over a week ago I wrote about why foreclosures were still occuring, see here.  In that post I described how banks would repackage subprime mortgages into CDOs and then resell them to investors.  Over the past few days more evidence is surfacing that the "investors" were either the investment banks that created the CDOs or these banks were essentially insuring the prdducts because most investors wouldn't otherwise touch them, see this Naked Capitalism post.  Or the investors knew these products would tank and took short positions that allowed them to considerably profit during the downfall, see here.

As more evidence surfaces regarding this nefarious behaviour, public anger against investment banks is likely to rise again.  This could affect the financial reform moving through Congress.  Particularly, these previously unregulated products are likely to have more light shed on them.  Regardless, this behaviour clearly shows that many investment banks--especially the "to big to fail" ones--cannot be left alone to develop and push "innovative" finanical products.  I'm not sure what the appropriate response to this behaviour is, but certainly it's not more bailout money (if such money is needed).  Even if the failure of these institutions would send us into another recession, perhaps that is best in the long run.