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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26985

Title: Emerging Competition and Risk-Taking Incentives at Fannie Mae and Freddie Mac
Authors: White, Lawrence J.
Frame, W. Scott
Keywords: Government-sponsored enterprises
mortgages
securitization
risk-based capital
moral hazard
charter value
Issue Date: 2004
Series/Report no.: S-FI-04-01
Abstract: This paper examines two major forces that may soon increase competition in the U.S. secondary conforming mortgage market: 1) the expansion of Federal Home Loan Bank mortgage purchase programs, and 2) the adoption of revised risk-based capital requirements for large U.S. banks (Basel II). We argue that this competition is likely to reduce the growth and relative importance of Fannie Mae and Freddie Mac and hence their franchise values and effective capital. Such developments could, in turn, lead to more risky behaviors by these two GSEs. It is this last consequence that warrants greater regulatory awareness.
URI: http://hdl.handle.net/2451/26985
Appears in Collections:Financial Institutions

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