I’m an investment banker! I buy a ton of subprime mortgages and other kinds of debt - credit card, student loan, you name it.
I package all of these up into financial products called Collateralized Debt Obligations. We slice and dice all kinds of risky investments and turn them into nice little parcels.
This process is called securitization. We, the investment banks, then sell these CDOs to our investors.
We portray CDOs as savvy, low-interest, stable investment opportunities because come on! Who doesn’t pay their mortgage? But, the folks who see the glass half empty hate us for profiting off what they call "predatory" lending.
Now, instead of paying the lender directly, the homeowner is paying back their mortgage to the investor!
The thing is, we know these bad mortgages make bad CDOs, but they also make us TONS of money! A higher risk of default means we get the CDOs at cheaper prices and can sell them at higher markups to investors.