The homeowner's insurance industry deserves a huge part of the blame. If people are told clearly and in writing that due to the history of flooding in certain areas that their property is not covered for extensive water damage due to flooding, a lot of this would be alleviated.
But since it makes them money (increased insurance premiums due to high-risk flood areas) they continue offering the coverage, and naturally when catastrophic flooding happens - the insurance companies are on the hook. Premiums for EVERYONE increases to make up for those losses. That is the whole concept of insurance to begin with!
The early-2000's subprime mortgage loans played an enormous role in the recession that occurred in 2008. People were given mortgage loans that they couldn't afford, and three or four years later the foreclosures began mounting. The stresses incurred impacted everything... consumer lending, the housing industry, and banks started running out of money. People began panicking, started cashing out their investments, the markets tanked, and the ensuing fallout led to an entire global recession. What occurred thereafter, propping up the financial industries and insurance industries, created a national debt deficit that will NEVER be recovered.
Bernie Madoff essentially did this same thing, but he was held accountable and sentenced to life in prison. How is this really that much different than a Ponzi scheme? lol...
Humans have this propensity to make unwise decisions, then expect everyone else to bear the consequences. That has never been more apparent than it is today. Some refuse to learn lessons, even at the risk of potential death.