Final answer:
Ginnie Mae was instrumental in the development of the mortgage-backed securities market in the 1970s by guaranteeing securities backed by home loans, which encouraged securitization and risk transfer to investors.
Step-by-step explanation:
The Government National Mortgage Association, commonly known as Ginnie Mae, played a pivotal role in the mortgage-backed securities market during the 1970s.
By providing a government guarantee on securities backed by pools of home loans, Ginnie Mae helped to expand the market for mortgage credit and made it easier for financial institutions to sell their mortgages to investors, effectively off-loading the mortgage risks. This facilitated the process of securitization, where banks and lending institutions would bundle mortgages into securities and sell them, thus promoting liquidity in the housing market. However, in retrospect, the aggressive securitization and lenient credit ratings contributed to the housing bubble and the financial crisis that followed in the later years.