A lot of the AAA growth from 1990 forward comes from the application of these structures to securitization of non-mortgage consumer loans, first auto and credit card loans, then others.
Proliferation of "credit enhancements" certainly did spark the AAA bubble, but I'm quite certain that participating financial institutions became much more profitable under this new regulatory regime.
Specifically, the deregulation of OTC derivatives[1] in 2000, which allowed issuers to purchase insurance against loss, caused massive growth in AAA ratings for ABS (dark purple section). In fact, there is an excellent Frontline piece on the story[2].
[1] http://en.wikipedia.org/wiki/Commodity_Futures_Modernization...
One other factor (from the early 90's, I think), was when getting asset sale treatment for GAAP and RAP (bank regulatory accounting) while still getting debt for tax treatment become standardized. That was a breakthrough.
Interestingly, there's now the question of whether the US debt should be rated AAA : Is there more than a 1-in-100 chance that the two sides can't get to some compromise (or, more likely, agree on how to kludge things) by September?
AAA is meant to lead to default at a 1-in-10000 per annum rate (it's a standardized measure). So, by that argument, USA downgrade should have already occurred.
And, since companies cannot be rated higher than the countries that they're in, that would lead to the immediate downgrade of Microsoft, etc...
There's no such rule. In fact, Japanese companies have been rated higher than Japanese sovereign debt.
http://www.bloomberg.com/news/2011-01-27/toyota-canon-rating...
You seem to be jumping from one conclusion to another which much reasoning to link them, and then drawing another conclusion from that.
Unfortunately the chart only goes back to 1990, and I don't have time to dig up historical figures. Perhaps more financial instruments used to enjoy a AAA rating until the Savings & Loan scandal of the late 80s, and the sudden upward jump in ratings represents the purging of bad assets from the financial system following the recession of the early 90s. But really, I don't know. Without disputing your observations above, I think we could learn a lot from looking at the largest discontinuity here rather than focusing on the absolute volume figures from recent years, notwithstanding the significant increase in securitization following the repeal of Glass-Steagall.