I'm still not exactly sure how they managed to turn subprimes into AAAs either but from what I've been able to understand the rating isn't determined by the typ

I'm still not exactly sure how they managed to turn subprimes into AAAs either but from what I've been able to understand the rating isn't determined by the type or amount of the loans but the perceived risk in it. It's like your credit rating. It doesn't matter how much you have out in credit but how you are determined as a risk. Someone with 10k in debt but a credit score of 780 is going to find it much easier than someone with no debt and no credit score. You are a known quantity, there is a number slapped on your file. The other guy is an unknown quantity, he doesn't have a history of payments so they perceive him as a lot riskier. The mortgage bundles work the same way. The banks told the agencies that there are a certain quantity of A loans, B loans, and C loans. Based on that information the bundles were given a rating. Well what happened is those A loans turned into D loans when they were unable to make payments. Then as the investors started asking for more information they found some people weren't being honest. Now the bank is stuck with these shitty assets and they are unable to lend money because it's tied up in junk. All of this is just my opinion as a financial outsider.