More specifically, the law doesn't consider it a crime, and being hated by population/government/etc is not a reason to put people in jail. This is a good thing: due process.
That is true, but there are similarities. The American lenders went beyond simple 'reckless lending' by disguising the subprime loans as healthy assets. This is similar to what the Irish bankers did when they created fictitious assets to give the false impression that the banks were not financially in trouble.
There has to be criminal fraud somewhere in the process of taking very bad mortgages, transforming them into AAA securities and selling them to pension funds.
I do not believe this statement to be correct: it seems entirely possible for this to be done via reckless incompetence, rather than criminal fraud. All it takes is for somebody to calculate the risk incorrectly and everybody else to fail to check their calculations.
It may involve criminal fraud, but it is also possible that it does not.
The pension funds had the prospectus, and on top of that a list of all the bundled mortgages. If they had wanted to look deeper beyond the AAA rating, they could have, but they were lazy and greedy too.
There are very profitable things that are illegal to do when selling vegetables in a street market, like fudging the scale. But you say there is no such protection against bad actors when selling billions in securities. Ok, in this Libertarian system where everything except physical violence is legal, why do people still deal with institutions that obviously deal in bad faith?
Were there any lies in the prospectus? Are Chinese companies selling asbestos with "asbestos-free" certificates doing anything wrong?
This is a good thing in principle. In practice, when people give bribes/campaign donations to cause these very laws to be created in such a way that keeps the actions of the people offering the bribes legal, there is something bad going on.