The Role of the Fannie Mae/Freddie Mac Duopoly in the American Housing Market

Abstract

This article provides a brief introduction to the role of the Fannie Mae/Freddie Mac duopoly in the American housing market. First, it defines the “government sponsored enterprise,” which is the type of hybrid public/private entity that Fannie and Freddie are and provides an introduction to the other significant GSEs. It then explains what Fannie and Freddie do in the American mortgage market and provides a brief history of how the two companies developed. Finally, it evaluates the two companies as duopolists in the conforming mortgage market and concludes that the current financial crisis presents an opportunity to rethink whether the Fannie/Freddie duopoly continues to serve the public interest.

Keywords: Fannie, Freddie, duopoly, monopoly, antitrust, secondary mortgage market, housing finance, government-sponsored enterprise, GSE