During the Great Recession, Americans learned that investing instruments called CDOs (Collateralized Debt Obligations) were one of the primary reasons for the economic downturn. Banks bundled risky subprime mortgage loans into CDOs, which then were deemed less risky because of their bulk. But once higher rates kicked in on flexible-rate mortgages, homeowners couldn’t make their payments. The result was a rash of foreclosures, layoffs, and economic shambles.
To be reminded of CDOs and their role in the 2008 recession, you can watch The Big Short. Or you can consider the bizarre case of Freya Coombe.