Mortgages that were packaged into mutual funds that traded on the stock exchanges.
Meanwhile, the insiders who knew what was going on (that the packaged mortgages were super high risk) insured their risk through new financial products - specifically 'credit default swaps' marked by AIG. The gimmick there was that AIG designed the swaps in a way that avoided insurance reserve regulations - and thus AIG had no money set aside in the event of default.
So when the shit hit the fan taxpayers coughed up close to 200 billion dollars to cover the 'swaps' sold by AIG that were backed by ... nothing.
A fair number of billionaires rose out of the ashes of those shenanigans. None were ever charged. That's how 'capitalism' works in the gold old USA. Always has. Always will.
