Document Type

Case Study

Case Series

The Rescue of Fannie Mae and Freddie Mac

JEL Codes

G01, G28


On September 6, 2008, as part of a four-part government intervention, the Federal Housing Finance Agency (FHFA) took into conservatorship the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), two government-sponsored enterprises (GSEs) that dominated the US secondary mortgage market. Concurrently, the FHFA, as conservator, entered into Senior Preferred Stock Purchase Agreements (SPSPAs) with Treasury, under which Treasury committed to provide funding to ensure the GSEs’ positive net worth. In return, Treasury received senior preferred stock and a warrant to purchase 79.9% of the GSEs’ common stock. The SPSPAs have been amended three times, which has placed additional restrictions and obligations on the GSEs. This case finds that the agreements accomplished their emergency goal of maintaining a positive net worth for both GSEs. However, the third amendment’s variable dividend formula, which was implemented in 2013, has been debated by academics and challenged by shareholders. As of this case’s publication, the SPSPAs are still in effect, and Fannie Mae and Freddie Mac remain in conservatorship.

Date Revised