The government forced these banks to offer bad loans

[SDGuy]

"The purpose of the CRA is to provide credit, including home ownership opportunities to underserved populations...The CRA mandates that each banking institution be evaluated to determine if it has met the credit needs of its entire community...The CRA is enforced by the financial regulators (FDIC, OCC, OTS, and FRB )...In 1995...the implementing regulations for the CRA were strengthened by focusing the financial regulators' attention on institutions' performance in helping to meet community credit needs...These revisions with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low-and moderate-income borrowers for home loans."

http://en.wikipedia.org/wiki/Community_Reinvestment_Act