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Title page

Contents

1. Introduction 3

2. The Supply and Demand for Safe Assets 5

3. The Baseline Model, with no GSE 6

4. The Extended Model with a GSE 16

5. Conclusion 36

References 39

Appendix A 41

Appendix B 43

Appendix C. Problem III 44

Appendix D. Problem IV 46

Appendix E. second-order conditions 48

Appendix F 50

Figures

Figure 1. Mortgage Market Equilibrium in the Baseline Model 12

Figure 2. Sequential game between securitizer, bank, and low-wealth households 19

Figure 3. Partitioning the distribution of potential borrowers 22

Figure 4. The bank and securitizer's credit quality cutoffs, where the difference between the two cutoffs is constant 23

Figure 5/Figure 6. (Omit) 29

Figure 6/Figure 7. (Omit) 30