Banks are into it, but they are in the higher levels.

The smaller lenders bundle it up and get picked up by a small investment company, that gets up by the big banks. It's a house of cards scheme, the foundation is toxic, and they all build their crappy derivatives on it.

The bank doesn't care because they are basically just scammers selling them to clients, or doing market making which minimizes exposure.

They might be invested in the companies, or their risk extends until they kick them off their books, that is if they find investors stupid enough to buy this, which the always do.