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22. How to Become a Markets Guru: Understanding the Investment Banking Clients

The Wall Street Skinny

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Unpacking GSEs and Mortgage Complexities

This chapter explores the role of Government-Sponsored Entities (GSEs) like Fannie Mae and Freddie Mac in the financial system, detailing their functions of providing liquidity through mortgage acquisition. It highlights the complexities of mortgage-backed securities and the impact of the 2008 financial crisis on these entities, including the implications of subprime mortgages and the risks involved. The discussion also delves into investment strategies related to bond duration and convexity, emphasizing the importance of understanding these concepts in fluctuating interest rate environments.

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