I don't know if that's in the movie or not, but I read a couple books on the 2008 crash, and that struck me as the most wrong-headed thing about it all.
CMOs are collateralized mortgage obligations -- bundles of mortgage-backed securities that are diversified as far as risk ratings and geography.
On the geographic diversity, the thinking was some housing markets occasionally had significant downturns, but, overall nation-wide, there's never been a severe housing market downturn (or not since the Great Depression or whatever and supposedly regulations since made a re-occurance of that almost impossible), so they were considered safe investments by apparently a lot of professionals who should have known better. (Or as the proverb goes, there are none so blind as those who refuse to see).
They got AAA ratings or whatever very high ratings from rating agencies like Moody's, S&P, and Fitch. Part of the reason for that is that the issuers of CMO's paid the rating agencies for their ratings. So, to keep the issuers' business, the rating agencies had a strong incentive to provide good ratings.
I remember also some very well known person (at the time) at Merrill Lynch (Henry Blodgett) who was pushing mortgage funds that he and the analysts knew were crap (according to internal emails), onto individual investors. That's how I remember the story anyways. Afterwards, he started Business Insider.
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