creditors came to believe that their loans to unsound financial institutions would be made good by the Fed — as long as the collapse of those institutions would threaten the global credit system. Bolstered by this sense of security, bad loans mushroomed.
Of course any crisis is multicausal. I have been blaming affirmative action loans. But instead of pushing back against government pressure to make bad loans to protected minorities, lenders eagerly embraced bad loans – because of an entirely correct expectation that they would be bailed out
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