That helped insulate the original issuers from the consequences of their bad loans, yes - indeed, that was government policy too, the very raison d'etre of Fannie Mae and Freddie Mac, between them holding five trillion dollars of mortgages. Senators Hagel and McCain urged caution and drafted legislation to rein it in, but instead its lending standards were weakened in 2006 to expand it into sub-prime loans. http://www.washingtonpost.com/wp-dyn...802111_pf.html