This is an oversimplification. It is straightforwardly correct that, for any imperfectly correlated basket of assets, the senior slice will be safer than the junior slice. If you hold the most senior 10% of a basket of mortgages, 90% of those mortgages would need to default for you to start taking losses. That is rare in any context and in fact there is a good bit of evidence that AAA-rated mortgage-backed securities didn't actually do all that badly in the 2008 crisis: https://www.nber.org/papers/w24509

There were a lot of factors that contributed to the 2008 crisis: adverse selection leading to low quality portfolios, mispriced assets, high leverage which magnified losses, lower-quality securities being held by investors who couldn't really afford to bear the losses on them, etc. But the fundamental concept of tranching is not actually that bad, even though every time people read about it they think it's the exact same as 2008. Banks have been tranching debt since long before 2008 and they have been tranching debt ever since. Not just mortgages either, but all kinds of debt.

> unfortunately the ratings agencies bought into it and sold crap as AAA securities.

It's very hard to understand something when your salary depends on you not understanding something.

They just kept the music going, more ratings issued was more money for them. Paid by the bank creating the security, what could go wrong