CDS are not bad but the capital reserve requirements are way to low. If selling a CDS required a 1/3 capital reserve then they would be priced at reasonable levels and actually be wotprth something. Instead upper mid level employees used CDS to make a classic bet, in the worst case the company fails so it does not really matter how much it fails therefore my average expected downside is limited and the upside is unlimited, therefore lets go insane.
