Actually, the first party to bundle sub-prime and liar loans and issue so-called mortgage-backed securities was Fannie Mae and Freddie Mac.
It's how they got additional funds to buy even more sub-prime and liar loans.
The AAA rating traced to the fact that Fannie Mae and Freddie Mac were "instrumentalities of the United States government" -- inferring a high degree of security.
The banks bought these...then began trading them.
No matter what direction you approach the problem from, you keep ending up back at Fannie Mae and Freddie Mac...and the federal government. All the rest of the exploitation and fraud was second order -- accessories after the fact.
In a court of law, you will lose on such notion without a written agreement or guarantee from FMFM to claim AAA like US T Bills. Claiming something AAA means the mortgage company selling the portfolio must verify all the data for each loan in the package, all proper documents on its ownership of mortgage (ala title) before making such claims on a prospectus. Mortgage companies and bankers are learning the hard way that if you claim AAA mortgage backed securities you can be subject to put back option by the buyer if the information on your prospectus is inaccurate. Several large US banks were forced to settle when they sold AAA MBS to investors, hedge funds, Freddie Mac and Fannie Mae, and pension funds when they sued that the investments they brought were not AAA. The lawyers for the banks knew they cannot claim AAA by inferring that the gov will guarantee it because such guarantee never existed. Why else should the banks be forced to settle and how come FMFM sued the bankers that sold them the notes????!!!! Please know the laws before making claims. Look I am not saying the gov is totally off the hook, but the banks went beyond what was allowed because the Fed regulators did not monitor them and very hesitant to enforce the laws that existed until it was too late. Banks were not broke or desperate when they encouraged liar loans, they were simply greedy and reckless. If they had followed the laws and common practices they would have made tons of money in a booming real estate market without the need for liar loans. Our country would have weathered the damages from subprime loans much better. We may have survived and be on the road to recovery by now. The financial damage from subprime was survivable, but additional damage from the liar loans was the tipping point into the financial abyss.