Fannie Mae and Freddie Mac: Risk-Taking and the Option to Change Strategy
| Autor: | Jason Thomas, Robert Van Order |
|---|---|
| Rok vydání: | 2018 |
| Předmět: |
Finance
Economics and Econometrics 050208 finance business.industry media_common.quotation_subject 05 social sciences Subsidy Urban Studies Competition (economics) Private label Scarcity Loan Accounting 0502 economics and business Value (economics) Default 050207 economics business Financial services media_common |
| Zdroj: | The Journal of Real Estate Finance and Economics. 60:270-307 |
| ISSN: | 1573-045X 0895-5638 |
| DOI: | 10.1007/s11146-018-9679-7 |
| Popis: | We analyze causes of the surge in defaults experienced by Fannie Mae and Freddie Mac during the Great Recession. Our data are consistent with the following: The two faced a trade-off between subsidized risk-taking (due to a guarantee implied by their charters) and franchise value (due to the scarcity of their charters). Around 2005 there was a change in the relative benefits of the two due to increased competition from “private label” securities. Along with declines in house prices, the increase in defaults is best explained by exercising an option to change strategy, before regulators fully caught on, toward newer, riskier loan types, after the decline in franchise value. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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