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.
OK....who are the Rating Agencies??? NAME NAMES!