What is totally absent from this argument are the borrowers who took subprime and are now in their homes thanks to the opportunity afforded to them by the lender. For a number of factors including being self-employed and launching a new business (it was difficult for him to furnish a stable earnings history), my brother took a subprime mortgage 3 years ago. Now he and his five kids are in a home that better accommodate his family. Were it not for a subprime option he wouldn't have been able to move into his home.
Interestingly enough, when I spoke to him last week about this, he was unaware he had a subprime mortgage. He simply mentioned that his 10.5% interest rate seemed pretty high in his opinion and he was looking to refinance. My advice to him was to hang on for a bit and there's likely a government program on the way that will help him get his rate reduced and maybe put some $$ in his pocket.
With the exception of predatory lending practices and making loans to speculators, I would argue that subprime mortgages are a good for the economy and America in general because it helps those want to get into a home but for whatever reason don't qualify for conventional financing.