Controlling the Interest Rate Risk of Fannie Mae and Freddie Mac

Dwight M. Jaffee

No 2006-PB-04, NFI Policy Briefs from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: It is now widely recognized that the interest rate risks embedded in the Fannie Mae and Freddie Mac (F&F) retained mortgage portfolios create a serious threat to the US financial system. This paper evaluates proposals to control the interest rate risk embedded in these portfolios. The analysis focuses on the current proposal to limit the size of the F&F retained portfolios, but also considers alternative means to control this interest rate risk. The analysis takes into account (1) what fund sources would replace F&F as mortgage investors, (2) where will the interest rate risk reside after it is removed from the F&F portfolios, and (3) what is the likely impact of the change on US mortgage interest rates. The conclusion is to endorse several solutions, including size limitations on the F&F retained portfolios, each of which would reduce or eliminate the F&F interest rate risk that currently threatens the US financial system.

Pages: 41 pages
Date: 2006-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.indstate.edu/business/sites/business.in ... 006-PB-04_Jaffee.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.indstate.edu/business/sites/business.indstate.edu/files/Docs/2006-PB-04_Jaffee.pdf [301 Moved Permanently]--> https://indianastate.edu/business/sites/business.indstate.edu/files/Docs/2006-PB-04_Jaffee.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nfi:nfipbs:2006-pb-04

Access Statistics for this paper

More papers in NFI Policy Briefs from Indiana State University, Scott College of Business, Networks Financial Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ray Thomas (raymond.thomas@indstate.edu).