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Notes -
It's hard to say, there's probably a few million pages of congressional testimony in which various people might or might not hint at this obliquely, I actually have no idea. I don't think there was any major effort by the majority of loan originators in middle america to limit their exposure to the subprime mortgage market. There were some smart people who did, especially from 2006 onwards, just like there were some smart hedge funds who made the same play, and just as Goldman eventually realized it themselves (as fictionalized in Margin Call). Obviously there were people who predicted the housing bubble bursting more generally, but we're 400 years on from Tulip Mania and there are always Cassandras preaching about imminent doom. It's very hard to tell who got lucky and was neurotic at the right time (like the hypochondriac who finally catches a terrible disease very early) and who knew the whole thing was really a sham.
I'll say that my impression from old hands in investment banking rather than trading is that most did not expect a crash in 2007. The market had barely recovered to dotcom levels, it had only been 6 years since the last crash and 4 since the trough of the 2001-2003 recession, M&A activity was hot but not shockingly so, the housing market was the only red-light indicator, if it even was.
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