Once the dark forces demanded that loans be made to unqualified applicants, they weren’t quite done because banks weren’t stupid enough to make the loans if they had to keep them on their books. So, congress changed fnm and fre to allow them to accept crap loans. This opened the floodgates as the banks could then offload the loans to gse’s and just take the fees for making the loans. We were off to the races and and a few trillion dollars of bad loans got made. Add to that the fed keeping interest rates too low, and you have a massive misallocation of capital.

By the way, the fed is keeping interest rates at near zero right now. Remember the definition of insanity? Doing the same thing and expecting different results.