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Fannie Mae and Freddie Mac


Submitted By tmast93
Words 3753
Pages 16
Taylor Mast
BUAD 445
TTH 1:10-2:25
Dr. Leinberger

The Rescue of Fannie Mae and Freddie Mac This paper analyzes the working paper of W. Scott Frame, Andreas Fuster, Joseph Tracy, and James Vickery and their views on the Fannie Mae and Freddie Mac bailout as well as gives a background on the companies and how the bailout was structured and will affect both the government and both firms. At the end I will also take a look at a few views of others on the issue of the bailout. I think that this is a very important topic because it played a huge role during the recession. The financial crisis that started from 2007 to 2008 could have had a completely different outcome had the government not stepped in a bailed out these two large investment firms. It has been a topic of much controversy because it could have had a very different outcome had the government not stepped in to prevent two of the largest investment companies but on the flip side they spend a lot of tax payer money on helping private companies that have failed while the rest of the economy is struggling as well.
On September 6th, 2008 a federal conservatorship was imposed on two companies named Fannie Mae and Freddie Mac. These two government sponsored enterprises (GSE) play a very central role in the US finance system. This was one of the biggest events during the financial crisis. At the beginning of their conservatorships they held or guaranteed about $5.2 trillion of home mortgage debt. Both companies are public financial institutions that were created by Acts of Congress to fulfil a public mission to enhance the liquidity and stability of the US secondary mortgage market and promote access to mortgage credit, particularly among ow and moderate income households. The structures of both companies were bound to fail thanks to their singular exposure to residential real estate and moral

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