I blame the securities investors who, in their stampede to spend cheap liquidity provided by the carry trade, failed to apply due diligence to the ratings agencies by drinking their KoolAid.
Yes, I agree — in part.
The ratings agencies have plenty to answer for, tho. Many investors, esp. those running muni or state funds, have these stupid plug-n-chug ideas of which bonds to buy. So along come these ratings agencies, all spouting top-shelf ratings of these CDO’s and other MBS synthetic debt securities, and many of the elected treasurers or similar political money managers just look at the rating, look at the higher-than-average return and they say “Sure, let’s buy some.”
Still, anyone with some financial experience should look at anything with a AAA rating on it and know that if it isn’t US government-backed debt, or one of the seven AAA-rated US companies, then that dog ain’t huntin’.