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The overwhelming majority of the actual liar loans written under the CRA, and most of the junk loans in general, were written by dodgy firms like Countrywide etc., who didn't give a damn about the soundness of the borrower or the soundness of the house's value, because they intended to sell that note within days of its being executed.

Those loans were combined into "tranches" and assigned fantasy ratings of "AA" or "AAA" by Moody, S&P, and their fellow criminals.

Then the investment banks who were later bailed out by TARP stupidly bought these stacks of dog feces at face value, although no law passed by Democrats or anyone else required them to do so. So allow me to break out the world's smallest violin in sympathy for their plight......

“Yeah pal, why were there sub-prime loans in the first place?”

Because they were immensely profitable to the people that were writing them. I don’t know why the profit motive is suddenly so hard to understand.

A loan broker could get paid $10k for writing a subprime loan. And it was very easy to write several loans every day.

Hedge funds and investment banks were paying loan brokers the big money for subprime paper because they wanted to use it for creating CDOs and derivatives, which had become the big income generator in their business.

The IBs and hedgies and the rest of the shadow banking industry were totally unregulated by the government. They were not depository institutions and therefore did not come under the purview of the Community Reinvestment Act. They developed the subprime market because it was large, untapped, and high yield at a time when Treasury rates had become near zero.

Of course such elementary distinctions as the difference between commercial banks and investment banks, deposit takers and investment firms, the regulated lending industry and the shadow banking industry are completely unknown to those who just “know” that the government forced all of the subprime loans to be made. The fact that the majority of subprime loans were lent by firms entirely free of regulation is never allowed to interfere with their preferred story, no matter how much the story is at variance with the facts.