August 7, 2017 Kelsey Ramírez
The Federal Housing Finance Agency released the latest results of the Dodd-Frank Act stress test results for Fannie Mae and Freddie Mac.
Both of the GSEs failed the test, showing they would need a bailout in the event of a severe economic crisis, the stress test results showed.
The 2017 DFAST Severely Adverse scenario is based upon a severe global recession which is accompanied by a period of elevated stress in corporate financial and commercial real estate markets.
The stress test results showed the GSEs would require an additional combined $34.8 and $99.6 billion. While they would still need a bailout, this is an improvement from last year’s $125.8 billion.
An article from MarketWatch explains the scenario the stress tests creates:
Under the hypothetical scenario, a severe global recession with “elevated stress” in corporate financial and commercial real estate markets plays out over nine quarters from 2017 to early 2019. GDP would decline as much as 6.50%, unemployment would peak at 10%, and consumer price inflation would decline to about 1.25%.
Additionally, equity prices would decline about 50% even as volatility picks up. Home prices would fall by 25%, and commercial real estate prices by 35%.
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The author Greg “‘da Goose” is the founder and host of “The Gallant Goose & Friends” TM internet radio show and podcast heard on Talkshoe channel 139335. The show focuses on consumer and homeowner defense and attack strategies and provides a forum for guest attorneys, accountants, brokers, bankers and other professionals, activists and “thinkers” to share their general thoughts and opinions with the audience and give the listeners an opportunity for live call-in Q&A with the guests.
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