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Journal Article
The GSEs: where do we stand?
This article was originally presented as a speech to the Chartered Financial Analysts of St. Louis, St. Louis, Missouri, January 17, 2007.
Speech
The GSEs: where do we stand?
a speech to the Chartered Financial Analysts of St. Louis, St. Louis, Jan. 17, 2007
Working Paper
Conjectural guarantees loom large: evidence from the stock returns of Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are government sponsored enterprises (GSEs) with publicly traded equity. Although these companies hold government issued charters, their securities are not legally backed by the full faith and credit of the United States government. Yet, investors and rating agencies seem to believe that the U.S. Government would "bail out" Fannie or Freddie if they became distressed. We provide evidence of a conjectural guarantee in GSE stock returns. Stock that contains an option on returning the shares at a given price to the issuer -- the government, in this case -- show ...
Journal Article
Opinion : Risky business
Working Paper
An analysis of government guarantees and the functioning of asset-backed securities markets
Mortgage securitization has been tried several times in the United States and each time it has failed amid a credit bust. In what is now a familiar recurring history, during the credit boom, underwriting standards are violated and guarantees are inadequately funded; subsequently, defaults increase and investors in mortgage-backed securities attempt to dump their investments. ; We focus on a specific market failure associated with asset-backed securitization and propose a tailored government remedy. Our analysis of loan market equilibriums shows that the additional liquidity provided by ...
Working Paper
The GSE implicit subsidy and the value of government ambiguity
The housing-related government-sponsored enterprises Fannie Mae and Freddie Mac (the "GSEs") have an ambiguous relationship with the federal government. Most purchasers of the GSEs' debt securities believe that this debt is implicitly backed by the U.S. government despite the lack of a legal basis for such a belief. In this paper, I estimate how much GSE shareholders gain from this ambiguous government relationship. I find that (1) the government's ambiguous relationship with Fannie Mae and Freddie Mac imparts a substantial implicit subsidy to GSE shareholders, (2) the implicit government ...
Conference Paper
GSE debt and the decline in the Treasury debt market
Speech
Panel on government sponsored enterprises
Remarks before 40th Annual Conference on Bank Structure & Competition, Fairmont Hotel, Chicago, May 6, 2004
Conference Paper
Government and GSEs: relationship and regulation