GSEs Prevented Private Secondary Market
"A private secondary market for prime mortgages should have been a natural market development. Why did it never develop? The answer is obvious: no private entity could compete, or can now compete, with the government-granted advantages, and now the huge explicit subsidies, of the Government Sponsored Enterprises (GSEs). There can be no evolution of a private prime mortgage loan market while the GSEs make private competition impossible.
The core issue about GSEs is this: You can be a private company, with market discipline; or you can be part of the government, with government discipline. But you can't be both."
Read more of AEI's Alex Pollock's article "To Overhaul the GSEs, Divide Them into Three Parts" here.