Watch the slideshow at this link first. Then read below for a description of a minor inaccuracy.
The only very minor inaccuracy I’m aware of is that the “good” the “not so good” and “the ugly” should be renamed into five buckets named A through E tranches. Also, when the bank is left with the E tranches, they group the E tranches together and just cut them into more tranches so that they can sell the A through E tranches of the E tranches. Of course, this doesn’t make it better. It makes it worse.
Thanks to Stephanie for forwarding me the PowerPoint version of this.