[dhume]

So sales produces a prospectus that suggests this is a bad investment. Then they continue agreeing to package and promote these securities. Were there some information excluded from the prospectus which suggested to the sales force that they were actually a good investment, I might still be able to see them as honest. Otherwise, this sounds like an attempt to apply the Nuremberg defense where remaining in the situation of having immoral rules to follow was voluntary.

[yummyfajitas]

So sales produces a prospectus that suggests this is a bad investment.

The prospectus presumably described the security being sold as long on housing. If housing went up, it would have increased in value. Since housing went down, it decreased.

The security did what it was supposed to do. The fact that the people who bought it made an incorrect bet doesn't make the people selling it evil.