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You might want to go look at CDO's... or synthetic CDOs.

In comparison, crypto looks like a rational product relative to that.

The bad idea was making bad loans, putting them in CDOs, and then using flawed models to certify them as risk free. That's irrational.

Dividing up the credit risk on a pool of loans so that some people lose money only if all the loans go bad is a very good idea. You just need to make sure they are good loans.

The irony being it would actually help lower the barrier for entry a little to get a home loan on the consumer end of the spectrum but as you said they dropped that barrier subterranean and then predatory crap like payment-option ARMs and a massive lack of informed consent.

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