Banks were subsidized or required by the state to issue subprime mortgage loans to the poor; people with terrible credit who would have no chance of actually paying the loan back. The Federal Nation Mortgage Association would then give banks guarantees that they would buy the loans from them if they needed funds. So these terrible loans that no bank would ever issue were suddenly considered to be a reasonable investment, because the federal government would just buy them out. Something very similar is currently happening with student loans. This is why lenders will gladly loan 90k to somebody to major in Gender Studies, where the major itself provides very few financial prospects for the loan being paid back.

That system is not "markets." That system is the federal government saying "Americans need to be homeowners and Americans need to be college graduates," with no consideration for whether or not the loans will ever be paid back. So then of course banks will say, "uhh, okay, ya I'll give you a loan. The government has my back."

And then when all the people failed to pay back their mortgages, the banks get "bailed out" for doing shitty loans...but they were "bailed out" from the get go, that's literally WHY they issued the loans in the first place. People will say "oh look at these free market capitalist looking for social welfare," but again, these loans were only issues as a means of actual social welfare for the poor, subsidized by the federal government.