@yummyfajitas Tranches are parts of a CDO. The problem with subprime CDOs is that none of the tranches were of any quality. They all sucked. There was no "A tr

@yummyfajitas Tranches are parts of a CDO. The problem with subprime CDOs is that none of the tranches were of any quality. They all sucked. There was no "A tranche", it was all a bunch of garbage tranches. As for the "AAA" rating, that's a rating assigned to the whole CDO by a rating agency such as Moody's or Standard & Poor's. Toxic assets weren't always considered toxic. Some thought the bubble would last forever, some knew it would end but didn't know when & didn't want to miss out. Firms would get commissions for making or selling securities. Buyers of these securities made calculations that woefully underestimated mortage default rates & to make matters worse, borrowed money to buy these crap investments. Firms weren't required to keep the bad tranche of the CDOs either, they could rebundle all portions of CDOs into other CDOs(http://www.propublica.org/article/banks-self-dealing-super-charged-financial-crisis/single http://www.propublica.org/article/banks-self-dealing-super-c...). It's kind of like a factory where you're producing a large volume of inventory which you think is good(or know is crap but hope no one finds out), until word finally comes out that all your merchandise has a fatal defect. You're still stuck with your crappy merchandise & have to payback your debts. It's more complicated than that though when you get down to leveraging & the default swap daisy chains, essentially they all built a house of cards. You really have to wonder how they thought it would all pan out in the end. As for who is to blame, the banks & Wall Street hold the vast majority of the blame. These are the people paid millions to do their job & they failed miserably. There are many reasons home owners can't pay. I am sure there are some who gave fraudulent information, but I am also sure you'll find many who weren't over their heads when they got into the loan but have been affected by the downturn in the economy. Additionally you will find stories of people who know they can no longer pay & are trying to do the right thing by working with the bank to adjust their payment plan or arrange a short sale, but often banks have been very hard to work with or it's even difficult to find out who owns your mortgage due to the mess (mortgage inside an MBS inside of a CDO is parts of which are inside another CDO, that is owned by a firm that was bought out by a firm within another firm). As for banks falsifying documents, here you go: http://www.huffingtonpost.com/2011/07/20/wells-fargo-subprime-fraud_n_905198.html http://www.huffingtonpost.com/2011/07/20/wells-fargo-subprim... http://www.dailyfinance.com/2010/10/02/robo-signing-scandal-spreads-documents-show-citi-and-wells-also/ http://www.dailyfinance.com/2010/10/02/robo-signing-scandal-...