TITLE

The Impact of the Bailout of Fannie Mae and Freddie Mac on Mortgage and Housing Industries

AUTHOR(S)
Tung Hoang; Martin, Anna D.
PUB. DATE
December 2012
SOURCE
Review of Business;Winter2012/2013, Vol. 33 Issue 1, p28
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Executive Summary. The substantial size and importance of Fannie Mae and Freddie Mac in the U.S. housing market prompted the U.S. government to place these two government-sponsored enterprises into federal conservatorship in an attempt to maintain their solvency and restore confidence in the mortgage and housing markets. We assess whether the financial market perceives the bailout benefits to extend beyond preventing the collapse of Fannie Mae and Freddie Mac to indirectly benefit firms in related industries. Our analyses show that REITS, housing brokerage firms, residential construction firms, commercial banks, and securities firms experienced some positive valuation effects from the authorization of the bailout with the passage of the Housing and Economic Recovery Act and/or the conservatorship announcement. Additionally, we find strong negative valuation effects from the conservatorship announcement for Fannie Mae and Freddie Mac. Since the terms of conservatorship included the elimination of their common stock and preferred stock dividends, their adverse reaction to this announcement is not altogether surprising.
ACCESSION #
86286631

 

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