The Rescue of Fannie Mae and Freddie Mac (original) (raw)

The Rescue of Fannie Mae and Freddie Mac – Module A: The Conservatorships

Yale Program on Financial Stability Research Paper Series, 2021

Two government-sponsored enterprises (GSEs), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), dominated the secondary mortgage market during the US housing crisis, collectively holding or guaranteeing $5.3 trillion in mortgage assets by late 2007. As the crisis escalated, the two GSEs began to report substantial losses and their survival became uncertain. On September 6, 2008, the GSEs’ new regulator, the Federal Housing Finance Agency (FHFA), placed the firms into indefinite conservatorships, one step of a four-part government intervention to stabilize the enterprises. This case study evaluates the purpose and efficacy of the conservatorships and finds that they accomplished their emergency goals of stabilizing the GSEs and allowing them to maintain the secondary mortgage market. However, the FHFA Office of Inspector General concluded that the agency could better accomplish its oversight mission by proactively exer...

The Rescue of Fannie Mae and Freddie Mac – Module Z: Overview

Finance Educator: Courses, 2021

In September 2008, as the financial crisis that had begun the previous year escalated, the US government appointed a conservator for two government-sponsored enterprises (GSEs), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), that dominated the secondary mortgage market and were among the largest participants in the global capital markets. The conservatorships were the hallmark of a multipart rescue plan intended to save the firms from insolvency and a disorderly collapse and required the combined and coordinated efforts of several government agencies and instrumentalities. Ultimately, the government invested $191.5 billion into the firms and deployed a range of tools to stabilize them; this intervention was one of the largest undertaken by the government during the Global Financial Crisis and significant for being one of the few nonbank rescues that occurred. This paper looks at the rescue in totality and the reas...

The Rise and Fall of Fannie Mae and Freddie Mac: Lessons Learned and Options for Reform

2009

Abstract: Not so long ago, the US housing finance system was arguably the best in the world. Consumers had access to products that were not available elsewhere, and the market was able to sustain major economic disruptions with relatively little impact on either the cost or availability of mortgage credit. Fannie Mae and Freddie Mac (hereafter the GSEs) provided the cornerstone of that system and deserve much of the credit for its success.

Fannie Mae, Freddie Mac, and Housing: Good Intentions Gone Awry

2006

The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) are the two dominant entities in the secondary market for residential mortgages in the United States. This chapter describes and discusses these two companies and their special status in the U.S. residential mortgage market and recommends their true privatization, as well as a set of additional reform measures that would improve the efficiency of housing construction and consumption in the U.S. economy. Along the way, we will address a number of major issues that concern housing and its special place in the political landscape of America.

The Anatomy of the Mortgage Securitization Crisis

The current crisis in the mortgage securitization industry highlights significant failures in our models of how markets work and our political will, organizational capability, and ideological desire to intervene in markets. This paper shows that one of the main sources of failure has been the lack of a coherent understanding of how these markets came into existence, how tactics and strategies of the principal firms in these markets have evolved over time, and how we ended up with the economic collapse of the main firms. It seeks to provide some insight into these processes by compiling both historical and quantitative data on the emergence and spread of these tactics across the largest investment banks and their principal competitors from the mortgage origination industry. It ends by offering some policy proscriptions based on the analysis.