And their funding backstop was predicated on “constructive ambiguity,” which turned out to be neither constructive nor ambiguous. Money market mutual funds, too, managed their liquidity risks in an environment of unclear support.
Ultimately, if the diagnosis of the crisis fails to account for some of the broader failings of public policy, of which the GSEs are just one part, the prescription is unlikely to be effective. Second, the regulatory reform discussion of the past year seems overly preoccupied with questions of institutional design.