A way of putting lipstick on a pig that banks milked the hell out of from the mid-1990's til 2007. Unfortunately the banks got totally Bear Stearned when everyone saw through the lipstick and they were caught holding a whole sty of CDO pigs.
Sucker: "Um...I've heard bad things about those. What's so good about this one?"
Banker: "It's diversified! It's got subprime mortgage bonds from Kansas, subprime mortgage bonds from Georgia, subprime mortgage bonds from Nevada, and subprime mortgage bonds from Michigan!"
Sucker: "I've heard bad things about subprime - do you have anything else?"
Banker: "Of course! This other CDO is even MORE diversified. It's got Ninja loans, loans to homeless people to buy crack, Iraqi government debt, and loans to people that need some money to bet on the roulette wheel in Vegas. Of course there's almost NO chance that any of those people won't be able to pay back what they owe."
Sucker: "SOLD! Give me $10 million of it!"