Crime and Crisis, Means

The problem with ending the explanation with need and greed, as many have done, is that it explains the demand for easy and abundant home-equity financing, but not the supply. For that - which will constitute the means with which the crime was perpetrated - one must turn, perhaps first, to the Federal Reserve’s policies of easy-money during the some of the years of the first decade of the third millennium. Very low and even negative short-term real interest rates financed ultra-cheap introductory teaser rates, with the rate resetting at the third year to a level more in accord with the huge principal and the desires for extremely high-risk adjusted interest rates. Very low short-term Fed Funds rates funded very low introductory rates.
A minor but important role was played by the end of the tech bubble in 2000 and the ample use of the Greenspan Put - the generous use of expansionary monetary policy to prevent Americans from learning from their mistakes. Investors, who still had plenty of money from the Roaring Nineties, went and found somewhere else to play Casino.
But this is not enough either, because 30-year mortgage rates on fixed-interest loans were also at historic lows, not just teaser rates. Loan rates on long-term debt instruments, from mortgage to corporate to government debt, in the United States and in many other developed countries, have been falling for over a decade to unprecedently low levels. Ben Bernanke explained this phenomenon (Greenspan’s conundrum of lower long-term rate in the face of rising - at the time - short-term rates) by pointing out, first, the transformation of finance in the United States and abroad, and second, the structural reforms carried out by emerging-market economies (particularly China, but also Latin America and other Asian countries) that generated huge public and private excess savings. These savings could not be intermediated in the countries in which they were generated (because of disappointing profit opportunities) so they were sent to the United States and other OECD countries, where this flood of liquidity earned ever decreasing returns. The emergence of the Third World provided oceans of liquidity to the First World, which was only too interested in using it.