Categories:
Finance: stocks, options, etc.
Via email, from John Hempton:
Frannie is a terribly inefficient way to generate subsidies for people in the 60th income percentile (ie very marginal home buyers). I am sure I could do better with cash and a helicopter and some census maps.
Most of the email was supporting my continued correction of James Kwak. This time, Kwak claimed that Freddie and Fannie do not take interest-rate risk because they issue mortgage securities. In fact, they hold the most of the securities in portfolio, and this portfolio creates an interest-risk management problem.
READER COMMENTS
MtgGeek
Feb 2 2011 at 10:33am
The subsidy is the mis-pricing of the default risk, not the interest rate risk. And while the GSEs do hold a number of securities in portfolio, it is not most.
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