The risk of financial failure at mortgage finance company Fannie Mae is low relative to other large financial institutions, a former White House official said in a paper published by the company.

"On a 'stand-alone' basis, the risk of direct economic loss associated with the possible failure of Fannie Mae is low, both in absolute terms and compared to other large, regulated financial institutions," former White House Council of Economic Advisers Chair Glenn Hubbard wrote in a paper published late on Thursday.

Hubbard's analysis comes during a long-running debate over government supervision of Fannie Mae (FNM.N:) and its sibling mortgage finance company, Freddie Mac (FRE.N:) . Critics have said the two companies have become so large they could pose a risk to the financial system in a financial crisis.

Fannie Mae (FNM.N) Chief Executive Franklin Raines said Hubbard's paper counters critics who say the company's debt costs are lower simply because its congressional charter may lead investors to assume the government would back it in a crisis, not because its business risks are lower.

"Although without a doubt our congressional charter is valuable, Fannie Mae's debt spreads also reflect the company's low fundamental business risk," he said in a foreword to the paper.

Fannie Mae and Freddie Mac are shareholder-owned companies chartered by Congress to create a deep and liquid pool of funds for home buying. They do not lend directly to borrowers but buy mortgages from lenders and repackage them as securities for investors or hold them in their own portfolios.

The debt they issue to fund their activities is not guaranteed by the government. But Congress grants the companies benefits -- including the ability to borrow up to $2.25 billion each from the Treasury Department -- to assist them with their missions.

Investors believe those benefits imply that the government would prop the companies up in a financial crisis despite the lack of an explicit guarantee.

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