I think the point the author was trying to make with "counterfeiting" wrt the subprime crisis is like this: counterfeit goods offer superficial similarity to the real thing, but are made of inferior materials when you unpack them.
During the GFC, toxic mortgages were bundled in with mortgages with a high probability of repayment. Since the debt rating agencies gave those mortgage backed securities a AAA rating without doing quality assurance, they entered the market on the same footing as legitimate AAA-rated debt.
That’s not really what happened. It’s not that AAA rated MBS packages were secretly full of shit that should have brought down the whole rating. It was that the systemic feedback of over leverage wasn’t really taken into account.
The AAA’s wouldn’t have failed if it weren’t for the cascading effect of ARMs blowing out shit mortgages causing the financial system to get caught with its pants down.
In other words, the AAA criterion based on historical data would have been applied to the vast majority of each of the individual mortgages as well because they wouldn’t have been problematic assuming housing prices didn’t contract more than they ever had.
I take your point, though counterfeit goods aren't necessarily made of substandard materials. There are plenty of ways to skimp and then take advantage of the brand's existing reputation beyond shoddy crafting.
I was thinking 'counterfeit' in terms of things like baby formula and plastic rice, which cause severe consequences when co-mingled with regular inventory. I believe that's the scenario the author was referring to. For things like knockoff handbags, the materials used are largely the same and the price premium is heavily dependent on brand itself and not the cost of production and regulatory compliance.
During the GFC, toxic mortgages were bundled in with mortgages with a high probability of repayment. Since the debt rating agencies gave those mortgage backed securities a AAA rating without doing quality assurance, they entered the market on the same footing as legitimate AAA-rated debt.