Because they were misled! The rating agencies (S&P, Moody, Fitch etc.) made money by knowingly overrating the underlying securities. This was all orchestrated to get good fees for large investment banks and brokerage houses while letting dumb and greedy investors (many pension funds, 401(k), individual investors) left to hold the bag. But in a stroke of bad luck, a lot of big and rich investors are also going to lose their shirts and that is going to be fun to watch. Watch out for a rise in suicides a la 1929!
