Almost all the concerns associated with systemic risks flow from the size of the balance sheets of the GSEs, not from their purchase of loans from home-mortgage originators and the subsequent securitization of these mortgages. We have been unable to find any purpose for the huge balance sheets of the GSEs, other than profit creation through the exploitation of the market-granted subsidy.
Whether the longer-term growth rate of potential output will also be affected, remains to be seen. In any case, the reliability of output-gap measures as real-time clues to future inflation is weakened.   In the second place, the financial crisis has impacted the effectiveness of monetary policy.