Please explain to us lay people what "skewed incentives" means.

An example that come to mind is say you have a warehouse full of grain and rats.

You offer the employees a bonus for every dead rat they turn in.

Now if they do a good job of killing the rats this source of income will drop to zero so you have a skewed incentives as your employees now have an incentive to find ways to have a large and increasing number of rats in your warehouse.

A skewed incentive is simply money to do an evil act: I'll give you a huge bonus if you sell mortgages to people who cant pay them back.

In the case of the mortgage business the system was bad however the people on the front lines was working inside of a legal if very unwise system that they did not set up. Calling them evil and is a little must. Congress and the other branches of government knew what was going on but the business model was that homes prices would keep increasing and bail evreyone out of a very unwise business model.

The incentive here was to sell as many mortages as possible and there was no need to worry about the ability of the borrowers to repaid. The mortgages would be package into a pool and resold in short order lomg before the shit could hit the fan and with constant raising prices the shit might never reach the old fan in any case.