Government-sponsored Enterprises (GSEs)
Government-sponsored enterprises (GSEs) are publicly traded or privately held companies created by the U.S. government to reduce the cost of capital for certain activities. GSEs are typically chartered by Congress to fulfill public policy objectives, such as providing access to credit, capital, and liquidity to certain sectors of the economy. Examples of GSEs include Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Agricultural Mortgage Corporation (Farmer Mac).
History of Government-sponsored Enterprises
The first GSE was created in the early 1900s, when Congress passed the Federal Farm Loan Act of 1916. This act created the Federal Farm Loan Board, which was responsible for providing credit to farmers. Since then, Congress has created numerous GSEs to support various sectors of the economy. The most well-known GSEs are Fannie Mae and Freddie Mac, which were created in 1938 and 1970, respectively. Fannie Mae and Freddie Mac are responsible for providing liquidity to the mortgage market by purchasing mortgages from lenders and securitizing them into mortgage-backed securities.
Comparison of GSEs
| GSE | Year Created | Purpose |
|---|---|---|
| Fannie Mae | 1938 | Provide liquidity to the mortgage market |
| Freddie Mac | 1970 | Provide liquidity to the mortgage market |
| Federal Home Loan Banks | 1932 | Provide liquidity to the housing market |
| Farmer Mac | 1988 | Provide liquidity to the agricultural market |
Summary
Government-sponsored enterprises (GSEs) are publicly traded or privately held companies created by the U.S. government to reduce the cost of capital for certain activities. GSEs are typically chartered by Congress to fulfill public policy objectives, such as providing access to credit, capital, and liquidity to certain sectors of the economy. Examples of GSEs include Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Agricultural Mortgage Corporation (Farmer Mac). For more information about GSEs, visit the websites of the Federal Reserve, the U.S. Department of the Treasury, and the U.S. Securities and Exchange Commission.
See Also
- Mortgage-backed Securities
- Federal Reserve
- U.S. Department of the Treasury
- U.S. Securities and Exchange Commission
- Federal Farm Loan Act of 1916
- Federal Home Loan Banks
- Farmer Mac
- Credit Risk
- Liquidity Risk
- Interest Rate Risk
