8 Pages Posted: 25 Jan 2005 Last revised: 16 Mar 2010
From a public policy perspective, any reform of Fannie Mae and Freddie Mac in light of recent accounting revelations should include the crucial task of recalibrating managerial incentives to decrease the large risk appetite of the owners of two highly leveraged financial institutions that are perceived by many capital market participants to enjoy a government guarantee of their liabilities. In turn, Fannie and Freddie's safety-and-soundness regulator - who is essentially the debtholders' and taxpayers' representative - must be admitted to the two firms' boardrooms in a way that is atypical of an ordinary publicly held company.
Keywords: Fannie Mae, Freddie Mac, accounting, acounting practices, regulation, GSE, government-sponsored enterprises, corporate governance, CEO incentives
JEL Classification: G28, G21, K20, M41
Suggested Citation: Suggested Citation