Chapter 21. Federal Agency Securities

FRANK J. FABOZZI, PhD, CFA, CPA

Professor in the Practice of Finance, Yale School of Management

GEORGE P. KEGLER

President, Cassian Consultants

Abstract: The federal agency market includes the debt of various entities chartered by Congress to provide funding support for the housing and agricultural sectors of the U.S. economy and specific funding projects of the U.S. government. The largest issuers are also known as government-sponsored enterprises (GSEs). GSEs are either public or government owned shareholder corporations (Fannie Mae, Freddie Mac, and Tennessee Valley Authority [TVA]) or the funding entities of federally chartered bank lending systems (Federal Home Loan Banks and the Federal Farm Credit Banks). The debt of the GSEs is not guaranteed by the U.S. government. Certain smaller federal agencies have been created by Congress to address the funding of specific projects and can have partial or total government "full faith and credit" guarantees (Financing Corporation [FICO], Resolution Funding Corporation [REFCORP], Export-Import [Ex-Im] Bank, U.S.A.I.D.S., Private Export Funding Corporation [PEFCO], and the Small Business Administration [SBA]). Many of the smaller federal agencies have limited or chosen to not issue their own debt, but have used the Federal Financing Bank for their nonappropriated funding needs. Over 97% of the outstanding federal agency market debt is issued by the GSEs. In 2007, the outstanding non-mortgage-backed debt ...

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