http://www.bloomberg.com/apps/news?pid=20601087&sid=a5x0jMKZf4yc&refer=home Bernanke -1983 "The rapid growth in the market share of low-quality, high-yield bonds has important implications. First, there is a growing concern that very large quantities of high-risk debt may threaten financial stability. This danger would be particularly acute during periods of macroeconomic slowdown."
Debt repackaging and subprime crisis "High-yield bonds can also be repackaged into collateralized debt obligations (CDO), thereby raising the credit rating of the senior tranches above the rating of the original debt. The senior tranches of high-yield CDOs can thus meet the minimum credit rating requirements of pension funds and other institutional investors despite the significant risk in the original high-yield debt. When such CDOs are backed by assets of dubious value, such as subprime mortgage loans, and lose market liquidity, the bonds and their derivatives are also referred to as toxic debt. Holding such "toxic" assets has led to the demise of several investment banks and other financial institutions during the subprime mortgage crisis of 2007-08 and led the US Treasury to offer to buy those assets in September 2008 to prevent a systemic crisis."