It's one thing to price default into the risk of a note (this is cost of business as a lending institution). It's entirely another thing to price in egregious, arguably fraudulent business practices such as not properly verifying who you're lending to.

It's perfectly reasonable if you know there's no downside risk because the government not only will not punish you, but taxpayers will bail you out. Welcome to what they call capitalism these days.

One should not be surprised when their economically rational but morally reprehensible business practice is regulated away.