The credit default swaps, filtered through the CDOs were being used to replicate bonds backed by actual home loans.  There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product.  Wall Street needed [Steve Eisman]’s bets in order to synthesize more of them.  “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” said Eisman.  “They were creating them out of whole cloth.  One hundred times over!   That’s why the losses in the financial system are so much greater than just the subprime loans.  That’s when I realized they needed us to keep the machine running.  I was like, This is allowed?””

Michael Lewis, The Big Short: Inside the Doomsday Machine [p. 143]