Benn Steil


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Treasuries vs. GSEs

August 31, 2009


This chart shows the yearly change in purchases of securities backed by U.S. government-sponsored enterprises (GSEs) and in securities issued by the U.S. Treasury. In late 2008 and early 2009, U.S. households and the rest of the world began selling GSE-backed securities, such as those issued by Fannie Mae and Freddie Mac, and began purchasing more Treasury securities, which are considered lower-risk. American banks, however, moved in the opposite direction, increasing their purchases of GSE-backed securities. This suggests a growing appetite for risk in the banking sector.

Lee: Fewer Banks Tightening Credit Standards
Braithwaite: Banks Slow Credit Tightening

Post a Comment 5 Comments

  • Posted by Paolo Tirabassi

    Why don’t think that this suggests a growing dependence of banking sector from government?

  • Posted by Geographics

    The graphic is not taking a stance on the level of or change in dependence of the banking sector on government backing but rather shows three sectors and their changes in purchases of two assets: treasuries and agencies. This shift in purchases suggests a changing risk appetite within sectors.

  • Posted by Paolo Tirabassi

    Thank you. But I ask myself “why” the US banking system is taking that risk.
    Growing purchases beginned in March ’08, it’s true, but still continues. Are banks somehow commpelled? Do they know something other investors do not know?
    And I ask me also “which” banks are doing this.

  • Posted by Dom S

    What risk Paolo? Once the Feds back-stopped Fannie & Freddie last year they sent a pretty clear signal to us all, notably the banks that government absolution of agency “sins” doesn’t mean it won’t do the pennance for them.

  • Posted by Paolo Tirabassi

    Nevertheless, banks buy a lot of securities backed by GSEs, us all not so much…

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