Economist Viral V. Acharya Explains Why Fannie Mae and Freddie Mac Were Guaranteed to Fail
May 17, 2012
The 2008 financial collapse of mortgage giants Fannie Mae and Freddie Mac resulted in a sweeping government bailout of the Federal National Mortgage Association at a taxpayer cost of $150 billion.
In theory Fannie Mae and Freddie Mac were too big to fail, yet that is precisely what they were guaranteed to do, according to economist Viral V. Acharya, co-author of Guaranteed to Fail: Fannie Mae, Freddie Mac, and the Debacle of Mortgage Finance. He discusses how we can limit the economic damage and avoid making the same mistakes in the future on Wednesday, May 30, 2012, at 6:30 p.m. at the Central Library, 14 W. 10th St.
Written with Matthew Richardson and Stijn Van Nieuwerburgh, Archarya's fellow professors at the Leonard N. Stern School of Business at New York University, Guaranteed to Fail explains how poorly designed government guarantees for Fannie Mae and Freddie Mac led to the mortgage finance debacle. The book weighs different reform proposals and provides sensible, practical recommendations.
The book has garnered rave reviews. Bloomberg News says it "rises above a clash between partisans on the right -- who call the companies 'ground zero' in the meltdown -- and those on the left who blame deregulation and Wall Street excess ... Part primer, part policy prescription, the text explains in simple language what these entities are, how they got so big, and why we must fix them."
Writing in The Conversation (Australia), Stephen Kirchner calls Guaranteed to Fail "one of the very few books to focus squarely on the ultimate cause of the crisis: US government housing policy and the role of the two government-backed mortgage giants Freddie Mac and Fannie Mae in giving effect to that policy."
Acharya is a past professor of finance and academic director of the Private Equity Institute at the London Business School. His research interests include the regulation of banks and financial institutions, corporate finance, credit risk, and valuation of corporate debt. Among his many awards are a 2000 Best Paper Award in Corporate Finance from the Journal of Financial and the inaugural Lawrence G. Goldberg Prize for the Best Ph.D. in Financial Intermediation.
Admission is free. The event will be preceded by a 6 p.m. reception. RSVP online or call 816.701.3407. Free parking is available at the Library District Parking Garage at 10th & Baltimore.
Major funding for programs at the Kansas City Public Library is provided by a generous grant from the Ewing Marion Kauffman Foundation.