Easy. Bonus reward schemes.
A big bank is a huge corporation with tens of thousands of employees, and their personal interest is often not aligned with the interest of the organization itself. The same applies for the CEO. Employees and managers tend to concentrate their effort to maximize their bonus/reward plans, which vary differently from the stated goals of the organization.
Usually, banks try to remedy this by including organizational-level metrics in the bonus scheme for its middle and upper management, such as net income, risk adjusted return on capital, but in general what’s best for the bank is not necessary best for a specific employee(s) and vice versa.
I’ll illustrate this on your example - say that 30% of your base salary comes from a reward structure - you get paid additionally if the number of successful foreclosures are above X.
Would you care about short sales? No. That’s what would matter to the bank as an organization.You’d be dead against short sales actually, because then there wouldn’t be foreclosures and the number of successful foreclosures wouldn’t reach X and you wouldn’t get your bonus or however you may call it. You would be aware of the issue and discuss it with your colleagues, but you wouldn’t want to rock the boat and jeopardize the30% of your income so that a bank raking billions can rake billions and something.
This is a hypothetical scenario, but probably close to the truth. Same with predatory lending before the bubble burst - you want to push, push for loans and get your commission - it’s not your problem what happens later, it’s for guys in the recovery department to worry about.