Guaranteed to Fail: Fannie, Freddie, and the Debacle of Mortgage Finance (long PDF)
...Was the growth in private label MBS the culmination of the dream of the deregulation advocates of the 1980s coming to fruition, albeit two decades later? Or was it the emergence of new government-sponsored enterprises in the form of too-big-to-fail financial institutions? We argue the latter, and, with this emergence, came a battle between the GSEs and the too-big-to fail large complex financial institutions (LCFIs), and a race to the bottom in mortgage finance....

...Of course, the GSE firms and these LCFIs were not identical in form. The LCFIs had a more diversified product line, were afforded greater flexibility, and increasingly were perceived to have a too-big-to-fail government guarantee -- while the GSEs had a public mission, received a more explicit government guarantee, and were subject to lighter capital requirements. But when one digs beneath the surface, the failure of the LCFIs and the GSEs is quite similar – a highly leveraged bet on the mortgage market by firms that were implicitly backed by the government with artificially low funding rates only to differing degrees....