[TheOtherHobbes]

We need banks because they make it possible for the rich to gamble with the income of the poor.

If your deposits are backed by mortgages or other secured loans you and the bank expect an added return for the "risk" - which is really just making a bet that enough people can pay something extra to compensate for those who default.

This is presented as "how things are" but it actually makes no sense - not least in failing to explain why most of the population is so starved of cash, in spite of long working hours, that it has to borrow at all.

That aside - there's a feedback loop which pushes investors to riskier and riskier lending, sometimes supported by more and more extreme kinds of fraud. Eventually, but somewhat predictably, the system suffers logistic collapse. Because that's what happens to recursive systems with permissive parameters.