The problem was the government, using Janet Reno and the Justice Dept., FORCED banks and institutions to make these loans OR ELSE!
Remember all that “red lining” BS crap?
Once these bad loans were forced on the mortgage bankers they spread their risk around. They would usually just sell the normal loans to FHA, Freddie or Fannie (let’s get real - all government agencies and not private at all). When they couldn’t dumped the sub-primes (created by the govt essentially) they bundled them into securities and sold them.
Greed took over and they created too many and voila - bailouts.