> low value mortgage-backed securities were repackaged into a basket with a mix of securities and given a higher credit rating than what Subprime would have gotten on their own

This is fine. Tranching is fine. It works today, it worked in 2008 and it's based on the same mathematics as portfolio theory. (A physical representation would be a dam. You can turn volatile rivers into predictable flows if you hold a bunch in reserve and then let a small amount off the top.)

Nobody knew that for certain, however, and that was a problem if you needed cash today but verifying the underlying mortgages would take months of work. (Some AAA-rated CDOs defaulted though they all paid out in the end. There has never been a AAA-rated CLO default since like the 1990s.)