Misaligned Incentives and Financial Collapse

The worse the borrower, the more money the bank made. Before the housing crash,

banks paid brokers per loan closed — not per loan quality. Bad credit? Low income?

Didn’t matter. Risky borrowers meant higher interest rates. Higher rates meant

bigger fees. And banks didn’t plan to keep the loans. They sold them.

When the defaults came, families lost homes. The banks already got paid.

That’s the danger of misaligned incentives. When profit comes first, collapse comes next.