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Re: Why emoney? Why not a web of debt?



    Date: Mon, 23 Jan 1995 12:05:22 -0500 (EST)
    From: Michael Froomkin <[email protected]>
    
    Sallie Mae's commercial paper is NOT backed by the full 
    faith and credit of the US government.  They carry a specific disclaimer 
    to that effect.  It is true that many personal student loans (GSLs) from 
    banks are guaranteed by the government.  The system was recently reformed 
    to remove the riskless subsidy to Sallie Mae, which is 100% privately 
    owned, and very profitable.
    
    Similarly Fannie Mae and all other priavetly held GSE's are only backed 
    by an "implicit" federal guarantee.  Although the only time one of these 
    got into trouble the feds did bail it out.

I inferred (perhaps erroneously) a tone of correction in your message.
For the record, GSLs and GNMA loans were the only loans which I
explicitly claimed were backed by the full faith and credit of the US
government.  Thank you for your clarification wrt Sallie Mae.

    On Mon, 23 Jan 1995, Rick Busdiecker wrote:
    [...]
    > Student Loans (at least GSLs) and GNMA loans are backed by ``the full
    > faith and credit'' of the US federal government.  As far as an
    > investor is concerned, loan default looks the same as if the loanee
    > paid their debt off early.  The `web of debt' suggestion posted here
    > doesn't seem to follow the same model unless you count virtually every
    > form of financial transaction -- including buying a cup of coffe with
    > a dollar bill -- as fitting the model.
    > 
    > As a side note, GNMA (Ginnie Mae) is not for `general loans', but
    > rather VA and FHA primary residence mortgages with various
    > restrictions.  GNMA, FNMA (Fannie Mae), and FHLMC (Freddie Mac) all
    > exist to provide secondary markets for various kinds of real estate
    > debt.
    [...]