When a bank has a shortage of good (prime) debtors, it starts to lend to the “subprime” or terrible ones; a situation which usually happens when the bank has had too much money to lend.
See expansive monetary policy, bailout, Minsky moment
CURIOUS FACT: Illegal immigrants don't make good debtors
Starting in about 2000, subprime mortgages became prevalent in the USA. In good faith, the Fed set interest rates very low in order to spur economic growth. The artificially low interest rates caused the artificial growth of credit as banks were massively providing mortgages to clients with dubious credit quality, including illegal immigrants. The Fed followed the consumer price inflation rather than the inflation of mortgage credit (which reached the annual rate of 11.8 per cent from 2000 to 2007). Therefore, it thought its policy would not cause a financial crisis. It was wrong.
See malinvestments, Ludwig von Mises
Here you can see the credit bubble that peaked in the first quarter of 2008. The Fed didn't pay attention when it wasn't too late to do something with the bubble on time:
“Inflation of the money supply destroys the value of the dollar or pound, drives up prices, cripples economic calculation, and hobbles and seriously damages the workings of the market economy.”