Briefs, Notes & White Papers

Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO

Author:

​Robert S. Seiler, Manager of Policy Research

​The large and rapidly growing literature on financial crises, systemic risk, and the role of governments in mitigating that risk includes no detailed analyses of how Fannie Mae and Freddie Mac can affect systemic risk. This research paper addresses that gap by analyzing how the Enterprises operate in the housing finance system and the financial sector, how their activities affect economic activity, and how they can affect systemic risk in different circumstances. It also discusses how safety and soundness regulation of Fannie Mae and Freddie Mac by OFHEO limits the systemic risk associated with the Enterprises by ensuring their safe and sound operation.