askchapo

the loans they "gave" out were predatory as fuck, ARMs with balloon payments. these were extremely profitable loans and the banks over leveraged themselves to chase them and sign up as many as they could with shit like "Ninja" loans (no income, no job). the nut on those loans was insane for the lender and they would turn around and sell them to investors for big bucks after rating them as AAA safe. you have to remember banks are inverted. banks see savings accounts as liabilities and loans as assets. savings accounts cost them money and loans make them money.

loaning money to people who have shit credit and no collateral is far more profitable than the terms a lender can get loaning money to rich people with assets.

The Big Short is an entertaining movie that is also educational as hell about what happened, from a technical perspective.

the legacy of the GFC in the US for mortgage lenders is PMI aka Personal Mortgage Insurance. this is a mandated insurance premium the borrower has to pay on top of principal+interest payments on a loan that is "riskier". that's right, the insurance on a riskier loan is paid for by the borrower, but the lender is the beneficiary if the borrower defaults.

it's a beautiful system for capital formations.

Everything you said is true, but framed from the perspective of the banks.

Reframed:

People who wanted to own a home went to their bank, expecting their bank to act in their best interests. That person in the office must be highly educated, and if I couldn't afford my new home, they would tell me. Right? And, surely, they must be regulated by the government! If they lied to me, there would be penalties! They're legally obligated to do that—right?

And that banker said, "Of course you can afford to buy a home! Hey, I know your credit history hasn't been great in the past, but you can do it!"

Then the bank did some finance wizardry (also known as crimes), and said those loans are extremely cool and good. And the whole thing collapsed when everybody else realized they weren't.

Yes it was a fully top-down, banker-spun narrative for how people buying subprime mortgages were "irresponsible" rather than the massively overleveraged financialization of all mortgages, including subprime, by the banks. This is part of a common PR scheme by which to blame "consumers" and the poor for problems created by capitalism and the ruling class. Same as telling people to budget better when they complain about real wages dropping. Or to "sell-improve" if you've been unemployed and are desperate for a job. It's not that the fed created a baseline level of unemployment in the intetests of capital, it's that you didn't divine what skills were most in demand by capital 10 years before they needed them.

I've heard it exclusively explained the same way, so probably

Something else to note: it was one of the largest thefts of black wealth in US history, if not the largest. People not only had their homes pulled out from under them, they were then made to pay the bank for the privilege.

Obama bailing out the banks (which had to be done), but then not punishing the bankers or then moving on to help people get their homes back, has caused trauma that won't ever get fixed. It was redlining all over again in 2008.

Read "Chain of Title"