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

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Abstract

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 exerting greater control over its conservator approval process. As of this case study's publication, the conservatorship for both companies is ongoing.

Suggested Citation

  • Wiggins, Rosalind, 2021. "The Rescue of Fannie Mae and Freddie Mac - Module A: The Conservatorships," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 3(1), pages 282-318, April.
    • Handle: RePEc:ysm:ypfsfc:3199
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    File URL: https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=1133&context=journal-of-financial-crises
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    1. W. Scott Frame & Andreas Fuster & Joseph Tracy & James Vickery, 2015. "The Rescue of Fannie Mae and Freddie Mac," Journal of Economic Perspectives, American Economic Association, vol. 29(2), pages 25-52, Spring.
    2. W. Scott Frame & Andreas Fuster & Joseph Tracy & James Vickery, 2015. "Evaluating the Rescue of Fannie Mae and Freddie Mac," Liberty Street Economics 20151015, Federal Reserve Bank of New York.
    3. Wiggins, Rosalind, 2021. "The Rescue of Fannie Mae and Freddie Mac - Module D: Treasury's GSE MBS Purchase Program," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 3(1), pages 366-386, April.
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    1. Thompson, Daniel, 2021. "The Rescue of Fannie Mae and Freddie Mac-Module B: Senior Preferred Stock Purchase Agreements," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 3(1), pages 319-352, April.
    2. Metrick, Andrew, 2021. "The Rescue of Fannie Mae and Freddie Mac - Module Z: Overview," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 3(1), pages 447-503, April.

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    More about this item

    Keywords

    GSEs; conservatorship; secondary mortgage market; Fannie Mae; Freddie Mac;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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