> downgrades of those led to alternative structures
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...
Yes, there were several factors that spiraled up together: the entry of 2 new rating agencies, the new credit enhancement structures, the new types of collateral that the agencies deemed to have "predictable enough" P+I cashflows, and the pension funds and insurance companies' appetites for AAA.
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.
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.