This is not correct. The vast majority of subprime loans were issued and packaged by private entities into structured entities — those high-risk securities wer

This is not correct. The vast majority of subprime loans were issued and packaged by private entities into structured entities — those high-risk securities were then rated as low-risk by rating agencies. Your misunderstanding is probably around how Fannie Mae/Mac bought some of these securities and then had to be bailed out. They actually held fewer risky loans than most banks! Banks did collapse! (Lehman) as they were not, as you suggest, backed by the government. And a legislation-backed bailout was necessary was because again, these risks were not backed by the government. In broader sense, however, I agree that the banks and government both knew they were “too big to fail” and therefore could take risk without risk. I’d hold the murky position of the ratings agency higher on the list of malefactors in the crisis than FNMA.