Government Loan Guarantees, Market Liquidity, and Lending Standards

• 成果类型: Article
• 署名作者: Ahnert, Toni; Kuncl, Martin
• 署名单位: European Central Bank; Centre for Economic Policy Research - UK; Bank of Canada
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.01571
• 发表日期: 2024
• 页码: 4502-4532
• 关键词: Mortgage guarantees; adverse selection; market liquidity; Pecuniary externality; Pigouvian subsidy; government sponsored enterprises

摘要

We study third-party loan guarantees in a model in which lenders can screen and sell loans before maturity when in need of liquidity. Loan guarantees improve market liquidity, reduce lending standards, and can have a positive overall welfare effect. Guarantees improve the average quality of nonguaranteed loans traded and thus, the market liquidity of these loans because of selection. This positive pecuniary externality provides a rationale for guarantee subsidies. Our results contribute to a debate about reforming government-sponsored mortgage guarantees by Fannie Mae and Freddie Mac, suggesting that the excessively high subsidies to these guarantees should be reduced but not completely eliminated.