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The government forced banks? Gimme a break. They smelled nice ROIs and jumped at it.



To some extent Yes through community re-investment rules. Changes to GSE rules increase the number of people counted as potential borrowers under community rules, and banks must loan to a certain number of them. In effect, once Congress decided to make the GSEs back subprime loans, the community rules forced banks to make such loans.

In this case I don't think it actually contributed - too many companies were able to re-package mortgages in CDOs to sell to others and thereby not take any risk themselves: carelessness was to most dominant force. But the combination of community rules and GSE rules manipulation is a way this might happen again.
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"If they can't picture me with a knife, forcing them to strip in an alley, I don't want any part of it. It's humiliating." - windsock