Securitization removes incentives to monitor

I never really bought this as a reason for the crisis.

In fact, for many Wall Street firms, it wasn't enough merely to be able to package mortgage backed securities. They wanted in on the whole process, from origination to packaging to selling and even to the exacting business of collecting people's mortgage payments and distributing them to MBS holders (known as servicing).
Lehman Brothers was the first Wall Street firm to really embrace all aspects of the mortgage business. Bill Dallas remembers:

What was Lehman's model? "We wanna originate it. So we're
gonna buy originators and we're gonna buy a servicer." And they were pretty
successful at it. They bought BNC Mortgage. They bought Finance America. They
bought their own service, called Aurora. Well, Wall Street firms are pretty much
lemmings. If Lehman's doing it and they're successful at it, then Bear Stearns
will go and Merrill will go and Goldman will go. They'll all go at it. And they
all did.

(pg. 73)

This is from And Then the Roof Caved In by David Faber which was better than I had expected. One aspect that of the financial crisis that I did not realize was that the earnings smoothing scandal at Fannie Mae and Freddie Mac in 2003-2004 forced these GSEs to slow down their buying of MBS and created a vacuum for Wall Street firms to fill. Of course when the GSEs were let off the hook they stepped back in with a vengeance.

Also interesting was how seemingly easy it was to become a subprime lender. The book profiled Daniel Sadek who went from car salesman (Mercedes-Benz though) to subprime lender earning $5 million a month! And who was financing his operation? Wall Street.