I'm reading up on some government sponsored enterprises again to make sure I remember facts correctly. This is simply mind-blowing:

The government tried to avoid taking over the two GSEs, which were supposed to act as private corporations with a government guarantee.
Any economist worth his salt, I mean ANY economist worth his salt, would tell you that this is a recipe for fucking disaster. Moral hazard up the yazoo. Moral hazard that can easily cause systemic risk.

It's not even that the GSE's were the only part of this moral hazard. The government had a detailed history of bailing out banks when there was enough systemic risk and failures. Incentives 101 tells us that this leads to more systemic risk and failures.