How could government regulations have prevented or mitigated the credit crisis of 2008?

Some would
argue that it was not the role of government to prevent the credit crisis. They would advocate
that government should not have meddled in mortgage-backed securities and they definitely would
not have pushed for the "bailouts" of major insurance and banking firms. However, the
nature of the question mentions what government could have done, so I'll address that.

Government should not have been pushing banks to lend money to people who did not have
the income to pay for the mortgage. By giving banks economic incentives to loan money, the
government helped to fuel rising home prices which led to people taking out second mortgages in
order to fund major purchases or home renovations. When their homes were worth less than the
amount they owed, they were insolvent. Pushing banks to loan money to people was politically
popular at the timethe United States appeared to be on the road to nearly universal home
ownership. However, incomes could not keep up with rising housing costs...