Banks in a mess!

Most of the major banks are in a mess as a result of the subprime crisis and now we have information that the banks may have knowingly lent money to people that it knew were going to default. Of course,it is all mere speculation as such, but nevertheless the police are taking this matter very seriously and have already started an investigation of sorts.
This piece of news does not bode well at all for some of the top banks that had been exposed to this crisis, like Citibank. Even if all that has happened were not as a result of deliberate action on the bankers part, there is still the query 'how on earth could this happen?'.