People have always attempted to take on mortgages they could not afford. In the more distant past banks turned these fraudulent loans down to protect themselves.

In the mid 2000s, mortgage lenders were working with the customers, agents at countrywide for example, were helping their customers fill out documents fraudulently. (Years later a few would go to prison for this.) This was not a failure at the bottom, the system allowed those who would attempt to commit fraud, commit said fraud because they profited from it.

Completely agree that financial institutions encourage inprudent behavior. Nevertheless people are responsible for the choices they make.

Right, that's why we dont have speed limits, and people only get punished after they cause a fatal accident.

Or are you completely unwilling to believe that complex, and opaque systems need any kind of regulation to prevent abuse by people at all levels. And that people at the bottom of the system are the most likely to be abused by said system.

"Nevertheless people are responsible for the choices they make."

How is the normal not finance expert person supposed to navigate this? On the one hand you are supposed to believe investment advice but on the other hand you are not supposed to believe the financing advice you get when buying a house.

The financial industry wants it both ways. We have to trust them as experts when it suits them but when things go wrong it's the customer's fault.

This story completely ignores the role of the lending institutions in encouraging and facilitating this. If the agents of those institutions encourage people to believe "this is how you do it", quite a lot of people will begin to believe that it is the new normal, and worry that if they don't get in on it now, they never will be able to do so later.

It is pointless to say "they should have known better" because lots of people simply did not, and this had bad consequences for many who did, including people who did act responsibly, but lost their homes anyway as a consequence of this recklessness.

It is more to the point to say that the institutions and regulators should have known better.

One reason this part of the story is being overlooked is that none of the executives responsible for encouraging and facilitating irresponsible and even fraudulent lending were sanctioned in any way (maybe they had a reduced bonus one year, and had the effrontery to claim that was unfair.)

Ironically, those who walked away from mortgages they could have paid were acting as rational economic agents.

Because the houses weren't worth anywhere near what they were paying for them and no one would bat an eye if a business did it.

The illusion that the American business community deserves moral consideration has been used to fleece the general public for years.