Reichwingers never ask the question "Why did mortgages lenders make stupid loans to badly dressed people?" because that would mean admitting the problem is the market in unregulated securities.
In Realityworld, no-one would make such a bad loan EXCEPT that an unregulated lender who packs them and sells the lot as securities. The lender's agents are paid by volume, not quality, so there is a positive incentive to shovel out crap.
Even worse, those lenders who WANT to maintain standards are now at a disadvantage. They lose market share every time they demand that their customers show proof of income, proof of assets, proof of ability to pay. After a while, they choose to stay in business, and make lousy loans themselves. After all, they can always securitize them and get a private rating agency to call them AAA.
Now, a million bad loans became the basis of Triple-A rated securities ... and you know the rest.
Reichwingers can't talk about this because the solution is
(A) to regulate securities to ensure they're backed by REAL assets, and
(B) to pay for the regulation and the occasional bail-out by restoring the Securities Transaction Excise Tax ... 25 cents per 100 dollars, which we had until 1966 and most advanced nations still have some form of.
But Regulation and Taxation, in Reichwing world, is worse
than economic collapse.
Misunderstanding Credit and Housing Crises: Blaming the CRA, GSEs