There is the crux of the problem. The bank lent because it had the money because the mortgage industry was awash in cash because Fannie Mae was guaranteeing all of these crap loans.
Dump money into the system and you get inflation. Economics 101.
It sounds like the fed keeping interest rates so low for so long may have added considerable fuel to the fire. Plenty of people suspected that long ago.
I know we kept getting calls about interest only home loans ... didn’t sound like a good idea to me — LOL.