Risky Lending Practices

It's almost like the banks have skin in the game to vet who they lend money to!

who knew bad loans to folks with no means to pay for them would ever backfire?

You see a problem with that, the banks might not given their risk models and a chance to make money on the loan. They have shown that they generally as good credit risks, it’s just that they have no idea where their money is coming from (a legal/moral problem vs. a business one).

Only if they can pay back the loan otherwise you just end up with a banking crisis.

What are these cultural reasons that make bankers not want to lend?

The lack of defaults on loans also takes away much of the incentive for the lenders to due any due diligence on the viability of your decision. They can lend and will get their money one way or another (except in extreme cases like your friend).

I am not seeing how a lender is better off lending money to people who cannot pay it back.

they are taking a risk because they haven't credit checked the usermost people wouldn't be able to pay a $100k bill

Acquiring cheap loans without losing collateral when things go south - is the problem.

IMO it's less about the people borrowing money and more about the potential fraud.