The definition of SIFIs must Include Fannie Mae and Freddie Mac, the Federal Reserve banks and Open Market Committee and large federal credit programs

The attached policy study was offered as a response to MIT Center for Finance and Policy’s SIFI Contest.

The Financial Stability Board should prepare a full analysis of the financial aspects of Fannie Mae and Freddie Mac so that they can be designated NBNI G-SIFIs, once the Financial Stability Board has issued the final version of its Assessment Methodologies. Given the demonstrated global systemic significance of the two companies, their extremely high leverage, their holdings or guarantees of over $3 trillion and $2 trillion, respectively, of mortgage risk, and sales around the world of a commensurate amount of debt obligations and mortgage-backed securities, we have no doubt that the two institutions will meet those criteria.

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