An odd title to an odder investment vehicle.  Norma CDO I Ltd. is the full name, but it goes by NORMA and is a new breed of investments that was created at the end of the housing boom.  This tool is an example of how Wall Street took a good idea too far and it blew-up in their face. 

Norma took the bonds that were made up of thousands of mortgages made to sub-prime borrowers and then took a derivative of those bonds and sold that derivate to investors.  The difference being is that the derivative was based on other mortgages investments.  Essentially the deals created little value and passed risk from one group to the next. 

Why?  This practice creates fees for the banks that but them together.

What separates Norma from the rest of the marketable securities was that the underlying collateral used was the riskiest.  Instead of evenly spreading out the risk (diversifying).  Wasn't this the same thing that took the S&L's to town ... investing too much in JUNK bonds.  Michael Milken proved that a diversified pool of JUNK bonds would return more than commercial grade bonds.  That was a fact.  The problem came when too many investors wanted the JUNK bonds and would purchase anything without regard to diversity.

When will this industry learn from past mistakes?