The purpose of interest rates is to align the supply of capital with the demand for it. When they fall to zero, that sends a false signal that capital practically self-replicates and that no one really needs to care about where capital gets invested. These “malinvestments” are starting to show up more and more these days.
Among other things, authorities are trying to determine whether Tricolor double-pledged—using the same set of subprime loans as collateral against multiple warehouse loans. This would be akin to a homeowner with a $500K mortgage on a $600K house taking a second mortgage for $500K without notifying—in fact, intentionally withholding relevant information from—the lender about the first mortgage.
Those closest to the money creation of the central banksters do well in the up cycle of asset bubbles. Mimicking the fiscal responsibility of the central banks and the states that enable them always has a reckoning while the criminal enterprise of the state carries on in a new cycle.