The MBS-GSE or GSE-Treasury interest rate spreads seem to be insensitive to changes in the degree of intermediation because of the extraordinary substitutability of Aaa mortgages and their financing vehicles for high-quality corporate debt and Treasuries. The method of GSEs' intermediation may be another reason that we find so little effect of the size of the GSEs' MBS portfolio on home-mortgage interest rates.
Yet even if firms do not carry a balance, reductions in the size of their credit card lines may strain their cash flow and force them to cut spending or require them to use more expensive forms of short-term credit, such as trade finance.