Fannie and Freddie scooped up Countrywide loans and pooled them and others into mortgage-backed securities that were sold with an implicit taxpayer guarantee that eventually became explicit. The taxpayer guarantee allowed — indeed, encouraged — the lenders to be reckless, creating a moral hazard. In 2008, this set-up helped bring down the whole house of cards built by subprime mortgages.
The Mega Scandal Everyone Has Forgotten - John Fund - National Review Online
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