Fannie Mae and Freddie Mac and the 2008 Financial Crisis
This paper examines the causality link between Fannie Mae and Freddie Mac (F&F) and the housing crisis with particular emphasis on the systemic risk created by F&F. First the paper is premised on the role of F&F in the housing market and the role of securitization as a mechanism for transferring illiquid mortgages from balances sheet to investors to assure a better match between assets and liabilities and to free up capital. The second part of the paper analyses the costs and benefits of the two government sponsored enterprises activities. In the third part, I discuss how the incidence of the absence of market discipline led to moral hazard and to systemic risk. The last section offers proposals for improvements in public policy. I argue that if F&F provide little benefit to homebuyers – beyond enriching their shareholders – and cost a lot to the taxpayer, there is little point in trying to keep them. However, as privatization is very unlikely to happen regarding the political environment, I found that in order to make F&F more efficient, a mandatory subordinated debt issuance program, a receivership authority, and more transparency could change the consensus of investors' perception of an implicit federal guarantee and therefore strengthen market discipline
Year of publication: |
2009
|
---|---|
Authors: | Pelouze, Frederic Andre |
Publisher: |
[2009]: [S.l.] : SSRN |
Subject: | Finanzkrise | Financial crisis | Hypothekenbank | Mortgage bank | Immobilienfinanzierung | Real estate finance | Öffentliche Bank | Public bank |
Saved in:
freely available
Extent: | 1 Online-Ressource (31 p) |
---|---|
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 2009 erstellt |
Other identifiers: | 10.2139/ssrn.1424456 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10013158625
Saved in favorites
Similar items by subject
-
An Assessment of Fannie Mae and Freddie Mac’s Contribution to the Financial Crisis of 2008
Thomas, Jason, (2014)
-
The 2008 federal intervention to stabilize Fannie Mae and Freddie Mac
Frame, W. Scott, (2009)
-
Reregulating Fannie Mae and Freddie Mac
Jaffee, Dwight M., (2008)
- More ...