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the results of the authors’ own econometric analysis. Using multiple regression the authors estimate GSE spreads relative to yields on other corporate securities of varying credit ratings.

Wayne Passmore, “The GSE Implicit Subsidy and the Value of Government Ambiguity” (2005). Dr. Passmore estimates how much the GSEs benefit from federal sponsorship. Under his “middle of the road” assumptions he estimates that the GSEs retain about 53 percent of this gain. The procedure relies on estimates of the GSEs’ impact on mortgage rates from the Pass- more, Sherland, and Burgess study.

Alden Toevs, “A Critique of the CBO’s Sponsorship Benefit Analysis” (2000) and “A Critique of the CBO’s 2001 Study on ‘Federal Subsidies and the Housing GSEs’” (2001). In a pair of reports sponsored by Fannie Mae, Dr. Toevs critiques the CBO reports on ben- efits of federal sponsorship of Freddie Mac and Fannie Mae. In the first report Dr. Toevs assessed the 1996 CBO report, arguing that the funding advantage estimates for long-term debt and MBS were too high and that the reduction in mortgage interest rates should be applied to all conforming loans, not just loans purchased by the GSEs. In the second report Dr. Toevs argues that the CBO continues to overstate the “subsidies” to the GSEs and understate the benefits to homeowners.

U.S. Congressional Budget Office, “Federal Subsidies and the Housing GSEs” (2001) and “Updated Estimates of the Subsidies to the Housing GSEs” (2004). In 1996 CBO presented its first attempt to compare what it calls the subsidy received by the GSEs to the interest savings to homeowners resulting from

Revisiting the Net Benefits of Freddie Mac and Fannie Mae

GSE activities. The 2001 report revisits this topic, providing an extensive discussion of GSE opera- tions and CBO’s estimation procedure. Although the basic framework used in the 1996 report was retained, CBO made some modifications in 2001. The 2004 report was an update, applying the same methodology and parameters to data for 2004.

Role of the GSEs—Policy Recommendations

Robert A. Eisenbeis, W. Scott Frame, and Larry D. Wall, “An Analysis of the Systemic Risks Posed by Fannie Mae and Freddie Mac and an Evaluation of the Policy Options for Reducing Those Risks” (2006). The authors, all with the Federal Reserve Bank of Atlanta, review the literature on the risks and benefits of GSE activities. Their interpretation of this literature is that the GSEs, particularly their portfolios, provide limited benefits while presenting serious risks. Af- ter reviewing the policy options, they recommend limits on portfolio size to mitigate systemic risk.

Richard K. Green and Susan M. Wachter, “The American Mortgage in Historical and International Context” (2005). Green and Wachter provide an historical overview of the development of the American mortgage market and contrast its structure to markets in other countries. They document the uniqueness and variety of mortgage products offered to borrowers in the United States. Although the authors recognize the risks involved with the current structure, they argue that the benefits of GSE activities in the secondary mortgage market, including liquidity and macroeconomic stability, should be weighed alongside any potential risks

Appendix: Recent Literature



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