The key activity of the GSEs - the provision of liquidity to the primary mortgage market - can be accomplished exclusively through the securitization of mortgages; GSE portfolios of mortgage-related assets cannot serve this function.
Indeed, during a crisis, the GSEs' portfolios of mortgage-backed securities (MBS), in contrast to portfolios of liquid assets such as Treasury bills or cash, cannot provide liquidity to either the primary or the secondary mortgage market. To sell mortgaged-backed securities to purchase other mortgage-backed securities clearly adds no net support to the mortgage markets.