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<p>Maybe you “clearly interpreted” what I wrote, but I didn’t write about what happens if things went well.</p>
<p>It’s kinda like if I sold broken toys though. As long as someone buys the broken toys (or bad loans), what incentive do I have to fix them?</p>
<p>Fannie/Freddie might not be government in name, but in practice, they were and are. And with the $700 (/$850) billion, the Ibanks got treatment like they were government owned enterprises. And as we have seen recently, they are using that money on expensive vacations etc (and AIG is still paying Manchester United… maybe they can change the logo on the front of their uniform to say “American Taxpayers”)</p>
<p>Without a guaranteed market for an inferior product, the inferior product dies out of the business model, replaced with a superior product. Here, the I-banks should have been left to die, in the market. They have a bad product, they lose. But that’s not what happened. They got saved. Have a bad product? Don’t worry, the government will fix it for you.</p>