The problem was, none of this was based on reality. “The banks knew they were selling crap,” says a London-based trader from one of the bailed-out companies. To get AAA ratings, the CDOs relied not on their actual underlying assets but on crazy mathematical formulas that the banks cooked up to make the investments look safer than they really were. “They had some back room somewhere where a bunch of Indian guys who’d been doing nothing but math for God knows how many years would come up with some kind of model saying that this or that combination of debtors would only default once every 10,000 years,” says one young trader who sold CDOs for a major investment bank. “It was nuts.”