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Economic and Legal Considerations of Optimal Privatization; Case Studies of Mortgage Firms (DePfa Group and Fannie Mae)


  • John R. Garrett
  • Hans-Joachim Beyer
  • Claudia H Dziobek


Successful privatization must be accompanied by the complete removal of privileges and any public policy mission. Bank behavior changes rapidly as profit maximation replaces the bureaucratic objective function. Once privileges are granted, they are difficult to remove. Therefore, privatization is a one-time (nonreversible) operation. The German mortgage bank, DePfa, went through a carefully planned and lengthy privatization process that was successful. Fannie Mae, the U.S. mortgage firm, became a privately owned institution endowed with special privileges, which led to a quasi-monopoly position. This resulted in suboptimal financial sector performance. Fannie Mae’s special privileges have proven resistant to reform efforts.

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  • John R. Garrett & Hans-Joachim Beyer & Claudia H Dziobek, 1999. "Economic and Legal Considerations of Optimal Privatization; Case Studies of Mortgage Firms (DePfa Group and Fannie Mae)," IMF Working Papers 99/69, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/69

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    References listed on IDEAS

    1. Rodrik, Dani, 1993. "The Positive Economics of Policy Reform," American Economic Review, American Economic Association, vol. 83(2), pages 356-361, May.
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    Cited by:

    1. Khan, Iram, 2006. "Public vs. private sector : an examination of neo-liberal ideology," MPRA Paper 13443, University Library of Munich, Germany.
    2. Michael Andrews, 2005. "State-Owned Banks, Stability, Privatization, and Growth; Practical Policy Decisions in a World Without Empirical Proof," IMF Working Papers 05/10, International Monetary Fund.

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