Emerging Competition and Risk-Taking Incentives at Fannie Mae and Freddie Mac
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). The authors 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.
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|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126|
Phone: (212) 998-0860
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Web page: http://w4.stern.nyu.edu/economics/
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- Richard Roll, 2003. "Benefits to Homeowners from Mortgage Portfolios Retained by Fannie Mae and Freddie Mac," Journal of Financial Services Research, Springer, vol. 23(1), pages 29-42, February.
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04-01, New York University, Leonard N. Stern School of Business, Department of Economics.
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02-01, New York University, Leonard N. Stern School of Business, Department of Economics.
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The Journal of Real Estate Finance and Economics,
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- Stephen F. LeRoy, 1990. "Mutual deposit insurance," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun8.
- W. Scott Frame, 2003. "Federal Home Loan Bank mortgage purchases: Implications for mortgage markets," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 17-31.
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- John C. Weicher, 1994. "The new structure of the housing finance system," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 47-65.
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