52 former federal reserve governor alan greenspan

Info icon This preview shows pages 149–151. Sign up to view the full content.

View Full Document Right Arrow Icon
52 Former Federal Reserve Governor Alan Greenspan attributes the liquidity of mortgage markets to securitization rather than the extent of GSE portfolio holdings of mortgages. In a speech to the Conference on Housing, Mortgage Finance, and the Macroeconomy, Federal Reserve Bank of Atlanta, Atlanta, Georgia, dedicated to the theme of Government-sponsored enterprises (http://www.federalreserve.gov/boarddocs/speeches/2005/20050519/), he noted: “[S]ince the development of the MBS market, the determinants of interest rates that finance home purchase have exhibited little, if any, response to the size of GSE portfolios.” 53 Edward S. Prescott, 2002. "Can risk-based deposit insurance premiums control moral hazard?" Economic Quarterly, Federal Reserve Bank of Richmond, Spring, pp. 87-100. 54 See Acharya, Viral V., Adler, Barry, Roubini, Nouriel and Matthew Richardson, “Resolution Authority”, Chapter 8 in Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance,
Image of page 149

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
148 edited by Viral V Acharya, Thomas Cooley, Matthew Richardson and Ingo Walter, eds., John Wiley & Sons, October 2010. 55 Note that this feature closely resembles that of covered bonds, which is one of the more popular mortgage finance instruments that are employed internationally, as is described in Chapter 7. 56 MBA Response to the Administration’s Questions on the Secondary Market and GSEs, June 17, 2010 57 Toni Dechario, Patricia Mosser, Joseph Tracy, James Vickery and Joshua Wright (2010) A Private Lender Cooperative Model for Residential Mortgage Finance,” Federal Reserve Bank of New York, Staff Report no. 466, August 2010. 58 Numbers based on First American Core logic’s report on the number of homeowners who are underwater on their mortgages, and Deutsche Bank’s Securitization Reports on distribution of home equity in housing market. 59 This is not say there would be no government involvement in nonconforming mortgages. Chapter 9 describes the current FHA and VA model for supporting affordable housing, and we would expect that to continue in some form, whether it be homeownership or renting. To prevent a GSE-like entity from emerging, however, the program should be limited in scope, and, to ensure this, should define low mortgage limits and reduce the program to primary homes. 60 Acharya, Viral V., Pedersen, Lasse, Philippon, Thomas and Matthew Richardson, “Taxing Systemic Risk,” chapter 5 in Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance, edited by Viral V Acharya, Thomas Cooley, Matthew Richardson and Ingo Walter, eds., John Wiley & Sons, October 2010 61 The “shadow banking system” describes the parallel method of financing loans that developed wholly outside the traditional depository (banks and thrifts) system during the past few decades, especially for mortgages. The mortgages can be originated by mortgage companies, sold to securities packagers (including investment banks and the GSEs), who then sell the mortgage-backed securities (containing pools of mortgages) to investors
Image of page 150
Image of page 151
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern