Somehow the private financial sector contrived to convert its edge into an instrument of self-destruction, for the commercial and investment banks that packaged the mortgages together and sold mortgage-backed securities ended up holding large quantities of them.
In addition to subprime mortgage market, driven by the Fed, govt desire to expand housing, and lots of foreign reserves abroad uninterested in the low interest rates of US treasuries (see: Giant Pool of Money)…banks held on their balance sheets some of the crappy mortgages they were buying and packaging.
