SO WHO BOUGHT the BAD PAPER??? I NEVER could figure that out!
Pension agencies, bond funds, money market funds, hedge funds and foreigners to name a few. In the case of bonds funds and money market funds the hints to whether they had the toxic paper was in the prospectus.
You are forgetting that it was not sold as “bad paper”. It was sold as “AAA” rated paper. Think Treasury Bonds that pay more interest. That is what investors thought they were getting. They had not clue they were buying junk bonds. They were defrauded, pure and simple, by the rating agencies who rated them at “AAA”. That is who bought the bad paper — conservative investors looking for a modest rate of return on a bullet-proof investment about as safe as cash.