"Too Big To Fail" just turned the large banks into GSEs (PDF):

...Of course, the GSE firms and these LCFIs were not identical in form. The [large complex financial institutions (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....


Left wing hero Paulie Krugnuts even advocated creating a housing bubble for good left-wing economic reasons:

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.