Creditors Quote by Gary H. Stern
“RE: GSEs like Freddie Mac & Fannie Mae: "creditors will continue to underprice the risk-taking of these financial institutions, overfund them, and fail to provide effective market discipline Facing prices that are too low, systemically important firms will take on too much risk."”
About This Quote
Source Speech: Financial Forum, 2022
Creditors undervalue risk, leading to over‑funding and weak market discipline.
In simple terms: Creditors underprice risk, causing excess funding and poor discipline.
Key Takeaway
Enforce realistic risk pricing and discipline.
Themes
Finance
Risk
Credit
Market discipline
Regulation
Mood
analytical
critical
Type
policy
analytical
When to use this quote
- Banking
- Policy‑
- Investment
- Risk management
Key Concepts
Moral hazard
Systemic risk
Pricing models
Questions to Reflect On
- How can regulators improve risk assessment?
- What incentives align creditor behavior with true risk?
A Different Perspective
Market forces may correct pricing without intervention.
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