Massive frauds are predictable when it becomes profitable to participate. For example, right now in the UK, the government is guaranteeing certain loans through a Covid relief program. Predictably, banks are letting a high number of fraudulent loan applications through. The banks are participating in the fraud as victims, willing victims who expect to make a profit from it. It seems like the government is going to raise its eyebrows and "tut-tut" a little bit but basically let them get away with it.
Like Madoff? The subprime lending/NINJA loans? In my opinion both of those things would have been harder if everyone was doing more due diligence. Moral hazard took away some of the incentive to do that.
"everyone was doing due diligence" is not really realistic expectation. It amounts to blaming everyone for small bad thing while excusing massive big bad thing going on.
With a bubble in Beanie Babies there was accompanying fraud and other criminal activity, with most consumers not wittingly participating, but they were affected by it.
So with the asset bubble of the 2000's, this kind of behavior affected everyone, as everyone needs a house.
In another thread I have said I don't blame the masses who may have made bad decisions in hindsight, as they did not have access to all the relevant information. So I do blame the fraudsters, but in the end I really only blame the Fed for keeping interest rates too low, and of course that can circle back around to society as well if you like.
