Plus the inflated ratings mortgage bonds got from crooked services like Moody’s and S&P that valued pure junk at BB and even A levels. So funds were trading securities for millions of dollars that weren’t worth anything. When the first card was pulled out, the whole house collapsed.
It turns out that the bond ratings were accurate, though. The Federal government came in and propped up the mortgage bond market, which effectively made mortgage bonds no different than U.S. Treasury bills in terms of their underlying risk.