Uh, actually, it wasn’t until recently that they were backstopped by Uncle Sugar.
The bonds of Fannie/Freddie were not guaranteed until the moment when the PRC looked at the potential losses in the US RMBS market and started selling off their $300B position in July of 2008.
Then Paulson and the Bush administration slapped a guarantee on the bonds, followed by taking Fannie/Freddie into the government in September, 2008.
The one thing that Greenspan got right in his career at the Fed was telling Congress (repeatedly) about the market mis-pricing Fannie/Freddie debt, pricing it as tho it were guaranteed when it wasn’t. At that point, the GSE paper should never have been AAA - it should have been nothing higher than AA.
Yes, I agree entirely. Fannie/Freddie should not have been AAA back before the “Uncle Sugar” (I like that) guarantees from 2008. I was just giving a simple answer.