Back Matter
  • 1, International Monetary Fund
  • | 2, International Monetary Fund


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Hans-Joachim Beyer, Association of Public Sector Banks, Bonn; Claudia Dziobek, IMF; John R. Garrett, University of Tennessee at Chattanooga. The paper has benefitted from discussions at the Federal Reserve Bank of Dallas and during the conference on Privatization of Banks co-sponsored by the Federal Reserve Bank of Dallas and the World Bank (March 1999). The authors would like to thank William E. Alexander, Stefan Ingves, Dwight Jaffee, and JoAnn Paulson for insightful comments.


A distinction can be made between state-owned commercial banks and special purpose state banks. In Germany, for instance, most state banks such as the Landesbanken, and savings banks are, for the most part, universal banks operating according to commercial principles and fully subject to legal and regulatory framework. By contrast, special purpose banks pursue defined policy goals such as housing, small enterprise development.


In many transition economies, privatization of state banks is complicated because the banks often are sole providers of credit in their market segment (agriculture, housing, tourism, and trade).


It was called Preussische Landespfandbriefanstalt (Prussian mortgage institution) and was incorporated as state-owned entity (oeffentlich-rechtlich). As of Jan 1, 1999, DePfa restructured its operations and took a new name, DePfa-Deutsche Pfandbriefbank AG - Bau-Boden, where Bau-Bodenbank is integrated. DePfa (as a holding company) covers the areas of state finance, issuing of securities, and management. National and international commercial mortgage finance and real estate holdings are shifted to Bau-Bodenbank.


Until the 1980s, these banks relied primarily on household deposits for funding, making it virtually impossible to offer long-term fixed interest housing loans. Today, these banks can obtain longer term funding through their associated institutions at the federal level (such as the Landesbanken or the DG Bank for cooperative banks).


Gesetz ueber Pfandbriefe und verwandte Schuldverschreibungen oeffentlich-rechtlicher Kreditanstalten (ÖPG).


First ranking (1. Rang des Grunduches) constitutes the highest priority creditor status. A mortgage loan may not exceed 60 percent of the loan value.


In essence, civil servants were allowed to keep their status even after privatization while any newly hired staff were offered standard private sector contracts. Thus, a dual track system was established that is phased out as civil servants retire.


Moody’s rating agency refers to the corporation as Federal National Mortgage Corporation (FNMA) while Fannie Mae is the corporate name used in government studies and by the corporation itself.


Other Government Sponsored Enterprises (GSEs) are:

Farm Credit System

Federal Home Loan Mortgage Corporation (Freddie Mac)

Federal Home Loan Bank (FHLB) System

Student Loan Marketing Association (Sallie Mae)


Studies sponsored by or using financial support from Fannie Mae come to dissenting views on each of these issues. Some of these studies are also included in the above mentioned volume.


Kane (1998) notes that rating agencies assign Fannie Mae a triple A rating because of the federal government’s compelling incentives to insure its continued viability. Fitch rating agency is quoted as stating, “Although [… Fannie Mae’s] obligations are not explicitly guaranteed by the U.S. government, Fitch believes that in the unlikely event of financial difficulties, the Federal government would support the company to the extent necessary to provide for full and timely payment of […its…] mortgage-backed securities and unsecured senior debt.”


See: Stanton, in Studies 1996. The estimates are taken from The Budget of the U.S. Government, 1996, Analytical Perspectives, p. 122.

Economic and Legal Considerations of Optimal Privatization: Case Studies of Mortgage Firms (DePfa Group and Fannie Mae)
Author: Mr. John R. Garrett, Hans-Joachim Beyer, and Ms. Claudia H Dziobek