Barack Obama said subprime lending was a good idea
Barack Obama said subprime lending was a well-intentioned idea that was abused
This claim is a distortion of a speech Obama gave in 2007. What Obama said was that subprime lending “started off as a good idea” and compared the "subprime mortgage fiasco today" to "conflicts of interest" during the "dotcom boom of the 90s" and the "Enron and WorldCom scandals," each as examples of how "[w]e all suffer when we do not ensure that markets are transparent, open and honest." He went on to describe the problems all the problems surrounding subprime lending:
Subprime lending started off as a good idea -- helping Americans buy homes who couldn't previously afford to. Financial institutions created new financial instruments that could securitize these loans, slice them into finer and finer risk categories and spread them out among investors around the country and around the world.
In theory, this should have allowed mortgage lending to be less risky and more diversified. But as certain lenders and brokers began to see how much money could be made, they began to lower their standards. Some appraisers began inflating their estimates to get the deals done. Some borrowers started claiming income they didn't have just to qualify for the loans, and some were engaging in irresponsible speculation. But many borrowers were tricked into glossing over the fine print. And ratings agencies began rating bundles of different kinds of these loans as low-risk even though they were very high-risk.
Most everyone knew that some of these deals were just too good to be true, but all that money flowing in made it tempting to look the other way and ignore the unscrupulous practice of some bad actors.