It could be junk bonds, FX accumulators, equity-linked deposits, snowball swaps, Pinnacle Notes or (as in this case) subprime ABS-CDOs. Customers always want to take on more risk, and they don’t always appreciate the risks they’re getting into.
But – and this is something that a lot of banks forgot over the last few years – a bank’s job should not be to run the unwitting customer over and stuff them full of unwanted risk.
If the investors knew that they were selling protection on a collection of distinctly average bonds backed by distinctly average mortgages, then that would be one thing. But if they were being sold something that was marketed as a “rock solid never go wrong AAA-a-riffic but it still yields Libor+80!” investment, then that’d be another thing entirely, and it should be treated as such.