Where’s your Invisible Hand now Mr. Smith?
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People gave away their own money. The economy is only as smart as the humans that make it up - not very smart - just like government. The invisible hand is only in operation when people are fully rational - obviously there was a shortage of rationality. So it’s not the invisible hand’s fault.
The issue is whether individuals should be allowed to make stupid choices. To grapple with this we also need to grapple with our fetish for “choice”.
There should be an upper limit on interest rates in retail lending. Consumers with lower incomes or bad credit ratings shouldn’t be allowed to borrow. Just set a maximum rate at something like baserate+3% and the banks will have no option but to restrict lending. Why should I stand aside and watch somebody buy a TV on credit with 30% APR? They either succeed in paying it off (wasting loads of money when they should probably spend it on something sensible like food!) - or else they don’t succeed and end up in court. They should be forced to rent or save up until they can afford it and/or there credit rating improves- a much better situation for everybody.
The above is a good idea at any time, if only for moral reasons, and it just happens that it would also have kept this particular bubble in check.