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Who Holds Securities of Government Sponsored Enterprises?

Wed, Sep 10 2008, 23:17 GMT
by Asha Bangalore

Northern Trust

Who Holds Securities of Government Sponsored Enterprises?

Fannie Mae and Freddie Mac, the two Government Sponsored Enterprises (GSEs), are the talk of the town. Staying close to this, we looked at the details of ownership of securities issued by the GSEs. It is widely known that Fannie and Freddie have kept the housing market engine running and their securities are scattered in portfolios around the globe. Who owns securities of GSEs? The minutiae are interesting because they indicate how this asset class has grown in these portfolios and who is affected by the fortunes of Fannie Mae and Freddie Mac.

A majority of the owners of GSE securities include households, commercial banks, savings banks, credit unions, pension funds, life insurance companies, mutual funds, brokers, ABS issuers, REITs and the rest of the world. Table 1 lists the distribution of these securities among the largest five holders, excluding the GSEs themselves. As of 2007, the outstanding GSE securities (non-mortgage pool and those backed by mortgages) summed up to $7.37 trillion vs. $972.7 billion in 1987.

In 2007, the rest of the world held the largest share of outstanding GSE securities. The share of the rest of the world has grown noticeably from under 10% in 2000 to nearly 20% in 2007. It is also noteworthy that within the rest of the world, official holdings of these securities (also known as foreign central banks) are larger than the private sector (see chart 1). At the cost of stating the obvious, the future of the GSEs and how the crisis is managed will influence the performance of these portfolios.

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Published on  Wed, Sep 10 2008, 23:20 GMT