The GSEs were not completely private. They were Government Sponsored Entities. As such, they didn't have to be rated. They had the full faith and credit of the United States. So, they took the profits, and the taxpayers took the losses. Heads I win. Tails you lose.
BTW, thanks for supplying some of the other details for those who might read the thread.
“The GSEs were not completely private. They were Government Sponsored Entities. As such, they didn’t have to be rated. They had the full faith and credit of the United States. So, they took the profits, and the taxpayers took the losses. Heads I win. Tails you lose.”
You are quite mistaken here. You are equating a GSE with a Government Owned Entity, like Ginnie Mae, and they are not the same. Ginnie Mae is backed by the United States.
Fannie and Freddie began as government creations, that is they were sponsored by the government, as the S in GSE implies. But Fannie ceased being a government agency around 1968 when LBJ wanted it off of the budget, and Freddy never really was one. Once they were sold to private investors F&F were not backed by the government and taxpayers owed their stockholders nothing. Dubya and Paulson decided to bail F&F out. There was zero legal obligation to do so, it was entirely a political decision and not one required by law.