It was a mess all around but between being forced to make subprime loans and aggressive lending practices (some made via advocacy to boost minority ownership, most probably focused on the color of commission money) lenders tried to get someone else to share in the risk.
I’ve a different mind about investment, looking at the historically safe yet cheesy returns investors got from the old structures (e.g savings accounts and having the average Joes biggest investment tied up in real estate subject to market forces) opening up equity investment to a wider range of people and not just elites is good for all concerned. What I meant re Europe is that Europe never had a Glass Steagall regulation and that sort of regulation, or deregulation, had nothing to do with our crash. I also believe TARP was necessary but the abuse of bankruptcy regulations on behalf of GM and Chrysler vs investors and debtors should not have gone forward.
“between being forced to make subprime loans and aggressive lending practices “
Banks weren’t forced to make subprime loans.
The CRA, which applied only to deposit taking banks and not to investment banks, required that a percentage of loans be made to to the community from which deposits originated.
As to whether those loans were business loans, mortgage loans, prime loans, subprime, conforming, or any other detail was entirely up to the banks.
Banks simply found it easier to purchase loans from independent brokers meaning that they didn’t have a hands on knowledge of the quality of the loans they were holding, a big difference from how they once operated. But that was their choice.
Government policy, including that originating with Dubya, pushed banks to make loans to ‘underserved minority borrowers’. They were entirely free to limit those loans to conforming paper. They chose otherwise, in large measure because everyone else was doing the same thing.