Changes

==Orszag and Fannie Mae==

==Orszag and Fannie Mae==

As worries about Fannie Mae's overexposure for securitizing nearly $1 trillion in debt grew in 2001, Fannie Mae hired Orzsag, [[Joseph Stiglitz]], and the Managing Director of their firm Jonathan Orszag to write a paper to calm fears. The conclusion made the fantastic claim that Fannie Mae's chance of insolvency were 1 in 500,000:

As worries about [[Fannie Mae]]'s overexposure for securitizing nearly $1 trillion in debt grew in 2001, Fannie Mae hired Orzsag, [[Joseph Stiglitz]], and the Managing Director of their firm Jonathan Orszag to write a paper to calm fears. The conclusion made the fantastic claim that Fannie Mae's chance of insolvency were 1 in 500,000:

{{QuoteBox|...the probability of a shock as severe as embodied in the risk-based capital standard is substantially less than one in 500,000 – and may be smaller than one in three million. Given the low probability of the stress test shock occurring, and assuming that Fannie Mae and Freddie Mac hold sufficient capital to withstand that shock, the exposure of the government to the risk that the GSEs [government sponsored entities Fannie Mae and Freddie Mac] will become insolvent appears quite low. <br><br>

{{QuoteBox|...the probability of a shock as severe as embodied in the risk-based capital standard is substantially less than one in 500,000 – and may be smaller than one in three million. Given the low probability of the stress test shock occurring, and assuming that Fannie Mae and Freddie Mac hold sufficient capital to withstand that shock, the exposure of the government to the risk that the GSEs [government sponsored entities Fannie Mae and Freddie Mac] will become insolvent appears quite low. <br><br>