Fannie and Freddie – a look under the lid

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The Wall Street Journal’s editorial page seems to have it in for Fannie Mae and Freddie Mac, the shareholder-owned, US government-sponsored mortgage finance agencies. It has criticised their leverage, use of derivatives and risk management, causing them “headline risk”, according to Fannie Mae’s chief executive officer Franklin Raines. A particularly critical Journal editorial in early February, entitled ‘Fannie Mae Enron’, caused the agencies’ shares to slip briefly, though debt markets

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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