Short version, a security is a stock or bond for sale with an assured value (wink, wink, not), such as a package of mortgages. You know how, when you buy your house, the mortgage gets sold almost the same day? The little bank has your promise to pay, the insane compounded value of all the interest over years, etc , and the big bank buys it and will do the connecting after that. The package it bought is a debt security bundle.
Back before the land/housing bubble, banks loaned to people they knew would not pay. But they sold packages of bad debt anyway. And repackaged those and sold them, and a few more times after that. Even if the original risky borrowers had paid, the packages had been overvalued and overleveraged to the extent that the holder of the last package had no hope of recovering their money. The securities were already underwater- bought for more than they were worth.
Short version, a security is a stock or bond for sale with an assured value (wink, wink, not), such as a package of mortgages. You know how, when you buy your house, the mortgage gets sold almost the same day? The little bank has your promise to pay, the insane compounded value of all the interest over years, etc , and the big bank buys it and will do the connecting after that. The package it bought is a debt security bundle.
Back before the land/housing bubble, banks loaned to people they knew would not pay. But they sold packages of bad debt anyway. And repackaged those and sold them, and a few more times after that. Even if the original risky borrowers had paid, the packages had been overvalued and overleveraged to the extent that the holder of the last package had no hope of recovering their money. The securities were already underwater- bought for more than they were worth.
And here we go again...