Investor Presentaiton
Example 3 (Agency MBS)
Ginnie Mae is the only mortgage-backed securities (MBS) issuer with explicit
government guarantee.
Although there were no such guarantees for Fannie Mae and Freddie Mac before the
financial crisis, MBS investors seemed to have implicitly assumed this.
As long as the market is functioning well and there were no defaults of the AAA rated
Agency MBS tranches, investors may have no reason to question that MBSs were
information insensitive.
When the losses of Fannie and Freddie accelerated as housing prices continued to
decline, the US government took both enterprises into conservatorship in early
September 2008 and provided explicit guarantee so as to avoid a potential collapse of the
primary and secondary Agency MBS markets (FHFA, 2008).
ABCPs also exhibit such features. Despite their off-balanced sheet characteristics banks
provide credit guarantees. (Acharya, Schnabl and Gustavo (2013))View entire presentation