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Market Discipline of Fannie Mae and Freddie Mac

Author

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  • Robert S. Seiler

    (Office of Federal Housing Enterprise Oversight)

Abstract

There has been little empirical research assessing market discipline of Fannie Mae and Freddie Mac. A first step is to investigate how Enterprise share prices and debt yields respond to new information. This paper does so by examining the share prices of Fannie Mae and Freddie Mac and the spreads between the yields of each Enterprise’s noncallable senior debt and the yields of comparable-maturity Treasury debt (senior debt yield spreads) during the period from February 2000 through mid-June 2003.

Suggested Citation

  • Robert S. Seiler, 2003. "Market Discipline of Fannie Mae and Freddie Mac," FHFA Staff Working Papers 03-04, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:03-04
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    File URL: https://www.fhfa.gov/sites/default/files/2023-04/2003-12_WorkingPaper_03-4_N508.pdf
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    File URL: https://www.fhfa.gov/research/papers/wp0304
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    References listed on IDEAS

    as
    1. W. Scott Frame & Larry D. Wall, 2002. "Fannie Mae's and Freddie Mac's voluntary initiatives: Lessons from banking," Economic Review, Federal Reserve Bank of Atlanta, vol. 87(Q1), pages 45-59.
    2. Mark Flannery, 2001. "The Faces of “Market Discipline”," Journal of Financial Services Research, Springer;Western Finance Association, vol. 20(2), pages 107-119, October.
    3. repec:aei:rpbook:52884 is not listed on IDEAS
    4. Flannery, Mark J, 1998. "Using Market Information in Prudential Bank Supervision: A Review of the U.S. Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 273-305, August.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Gordian Rättich & Kim Clark & Evi Hartmann, 2011. "Performance measurement and antecedents of early internationalizing firms: A systematic assessment," Working Papers 0031, College of Business, University of Texas at San Antonio.
    2. Robert N. Collender & Samantha Roberts & Valerie L. Smith, 2007. "Signals from the Markets for Fannie Mae and Freddie Mac Subordinated Debt," FHFA Staff Working Papers 07-04, Federal Housing Finance Agency.
    3. Deborah Lucas & Robert McDonald, 2010. "Valuing Government Guarantees: Fannie and Freddie Revisited," NBER Chapters, in: Measuring and Managing Federal Financial Risk, pages 131-154, National Bureau of Economic Research, Inc.
    4. Karan Bhanot & Donald Lien & Margot Quijano, 2008. "Will Pulling Out The Rug Help? Uncertainty About Fannie And Freddie'S Federal Guarantee And The Cost Of The Subsidy," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-28.
    5. Karan Bhanot & Donald Lien & Margot Quijano, 2008. "Will Pulling Out the Rug Help? Uncertainty about Fannie and Freddie’s Federal Guarantee and the Cost of the Subsidy," Working Papers 0035, College of Business, University of Texas at San Antonio.
    6. W. Scott Frame & Lawrence J. White, 2005. "Fussing and Fuming over Fannie and Freddie: How Much Smoke, How Much Fire?," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 159-184, Spring.
    7. Frank A. Schmid, 2005. "Stock return and interest rate risk at Fannie Mae and Freddie Mac," Review, Federal Reserve Bank of St. Louis, vol. 87(Jan), pages 35-48.
    8. Lucas, Deborah & McDonald, Robert L., 2006. "An options-based approach to evaluating the risk of Fannie Mae and Freddie Mac," Journal of Monetary Economics, Elsevier, vol. 53(1), pages 155-176, January.

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