Comparing the LIBOR spread isn't enough to compare senior subprime tranches to senior prime tranches. Among other things, the attachment point matters a very a great deal.

The attachment point is the % of cumulative losses after which a given tranche starts suffering losses of principal. So for example:

L+20 with a 20% attachment point against historical max losses in the asset class over all credit cycles of 1% is a lot better on a risk adjusted basis than L+200 with a 40% attachment point against historical max loss experience of 15%.

Without talking about historical loss experience we can't really guesstimate the margin of safety here nor say that a given tranche is or isn't good value.

Another possibly interesting nitpick: LIBOR isn't risk-free. It's an interbank rate so it is the short-term yields paid by highly rated financial institutions. Risk free means backed by an entity that can print money, like the Fed. That's why the LIBOR-Fed Funds basis exists.

Also, re: "I think it's interesting how high interest rate risky loans can be considered as sleazy while giving opportunities to the less fortunate is considered an admirable goal." check out the book _Scarcity_ by Mullanaithan and Shafir, which has a super interesting take on this question!