It's also complicated by the legal framework. My (limited) understanding of the problems with CDOs in 2008 was that multiple buyers could purchase insurance on the same bond. It's like if I could buy fire insurance on your house. If a lot of us did that and your house burned down, the insurer would have been on the hook for many times the cost of the underlying asset. This is why we had to bail out AIG.

When it's spelled out like that, the idea seems preposterous. But the legal framework allowed it -- in certain contexts. AIG et al call them "CDOs" instead of just "insurance" so they could avoid the more-restrictive legal framework governing the insurance industry.

And given that a typical CDO is the size of a Manhattan phone book (remember those?), there obviously is a lot of nuance that a lot of people did not understand.